While there are news reports that the U.S. Securities and Exchange Commission ("SEC") is on the verge of issuing new climate related disclosure rules for public companies,1 the SEC's Director of the Division of Enforcement ("Enforcement Director") recently took the opportunity to remind the public that the SEC already has the tools to enforce accurate climate related reporting. Speaking at the Ohio State Law Journal Symposium on February 23, 2024, the Enforcement Director, Gurbir S. Grewal, discussed the growing significance of environmental disclosure issues in securities law enforcement.2 His comments serve as a reminder to both public companies and financial institutions that accurate reporting of climate related issues is required for compliance with the current federal securities laws.
The Enforcement Director opened his remarks with the recognition that the SEC is not an environmental regulator. He noted, however, that restoring public trust in our institutions is a current priority for agencies such as the SEC. Ensuring that companies "speak truthfully" on environmental topics is one of the ways the SEC has endeavored to bolster public trust in the securities industry.
Citing investor studies, the Enforcement Director explained investors care about the incorporation of environmental considerations in corporate strategy, and, in response, many companies have begun disclosing environmental information. He believes that this presents an incentive to companies to both exaggerate their positive environmental activities and obfuscate negative environmental information. To combat this, he said the SEC relies on "long-standing principles" to "evaluate whether disclosures or statements are materially false or misleading" under the federal securities laws.3 That is, environmental-related enforcement actions may be brought under the existing securities laws framework.
The SEC has recently brought environmental-related enforcement actions against both public companies and financial institutions. The Enforcement Director emphasized that these actions should put both public companies and financial institutions on notice that the SEC can and will bring enforcement actions against those who provide environmental information that is materially false or misleading. As investors continue to place importance on these topics, companies must "speak truthfully" in their environmental disclosures to comply with current federal securities laws.
1 See, e.g., Jon McGowan, SEC Poised To Vote On Sustainability Reporting Standards for US Business, FORBES, Feb. 21, 2024, https://www.forbes.com/sites/jonmcgowan/2024/02/21/sec-poised-to-vote-on-sustainability-reporting-standards-for-us-business/?sh=5b6fa2c515ff.
2 See Gurbir S. Grewal, Dir., Div. of Enforcement, U.S. Sec. & Exch. Comm'n, Remarks at Ohio State Law Journal Symposium 2024 (Feb. 23, 2024), available at https://www.sec.gov/news/speech/grewal-ohs-022324?utm_medium=email&utm_source=govdelivery.
3 Gurbir S. Grewal, Dir., Div. of Enforcement, U.S. Sec. & Exch. Comm'n, Remarks at Ohio State Law Journal Symposium 2024 (Feb. 23, 2024), available at https://www.sec.gov/news/speech/grewal-ohs-022324?utm_medium=email&utm_source=govdelivery.
Arianna Skipper (White & Case, Law Clerk, New York) co-authored this publication.
