SEC Commissioner Eschews the “ESG Era” at Digital Insurance Forum
June 5, 2025
Regressing into Progress: Remarks Before the International Center for Insurance Regulation Digital Insurance Forum
SEC Commissioner Hester Peirce offered remarks at the International Center for Insurance Regulation Digital Insurance Forum on the role of ESG in the SEC’s broader materiality framework. Peirce noted that historically, SEC disclosure has been governed by “materiality,” which required companies to evaluate whether a reasonable investor would have considered an issue significant in making an investment decision. Peirce commented that the “ESG era” has warped the definition of materiality by creating a presumptive categorization that any issue labeled as ESG is “inherently material to long-term financial value.” In Peirce’s perspective, labeling ESG issues as material harms investors and companies by including “irrelevant and misleading red herrings” in otherwise focused financial analysis. Peirce observed that investors may be harmed by warped incentives to company management that reward managers for achieving high ESG metrics while failing to maximize long-term financial success. Further, she noted that companies expend “tremendous amounts of corporate resources” analyzing ESG data rather than generating value for shareholders.
Recognizing these “dangers,” Peirce noted that the government is reassessing its approach—specifically referencing the Department of Labor’s plan to rescind Biden-era ESG rules and the SEC’s decision not to defend certain ESG rules in court. Peirce also stated her position that the SEC should amend its rulebook to explicitly define materiality as the “governor of disclosure mandates” and should remove any provisions inconsistent with that premise.
SEC Given 90 Days to Make Decision on Climate Disclosure Rules
April 24, 2025
State of Iowa v. SEC, No. 24-1522 (8th Cir.)
The Eight Circuit Court of Appeals gave the SEC 90 days to decide whether it will rescind disclosure rules that would require publicly traded corporations to report on greenhouse gas emissions and disclose information about the potential impact of climate change on their financial results. The SEC had previously said that it would no longer defend the rules in a lawsuit brought by industry groups and states that argued that the regulations were beyond the scope of SEC’s charge as a financial regulator.
If the SEC decides to leave the rules in place, intervening states, such as Massachusetts, may decide to take up the defense. SEC Commissioner Caroline Crenshaw, who opposed the SEC’s decision to withdraw from the case, has urged the court to appoint a third party to defend the regulations.
SEC Approves Environmental Securities Exchange
The SEC approved the application of Green Impact Exchange to register as a national securities exchange. Green Impact Exchange will become the United States’ first environmentally focused national stock exchange, tapping into what it estimates is a $35 trillion economic sector. The public-benefit corporation aims to provide dual-listing opportunities to sustainability-oriented corporations. The approval is a departure from recent SEC policy, which has been largely adverse to ESG initiatives. Dan Labovitz, the exchange’s founder, has sought to distinguish his platform from the ESG movement, noting that “[Green Impact Exchange] is focused exclusively on environmental sustainability, where there tends to be a very direct connection between environmental risk and long-term value preservation, and between sustainability and long-term value maximization.” Green Impact Exchange will be fully electronic and will open for trading in 2026.
SEC Drops Defense of Climate Reporting Requirements
March 27, 2025
Iowa v. SEC, No. 24-01522
The SEC withdrew from litigation over climate reporting requirements promulgated last year, stating that its lawyers are “no longer authorized to advance” arguments defending the climate rules. The regulations required companies to disclose their greenhouse gas emissions and report on other climate metrics.
Acting SEC Chair Mark Uyeda stated that, in voting to withdraw the SEC’s defense of the rules, the SEC’s goal was to “cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.” The litigation will continue without the SEC, with Democratic state attorneys general taking up the defense of the reporting requirements.
Despite the SEC’s withdrawal from this litigation, the climate regulations will remain on the books until they are officially rescinded by the SEC or Congress or vacated by a court. The SEC paused the implementation of the rules last year pending the result of the litigation.SEC Rejects Attempt to Block Microplastics Proposal from Proxy Statement
March 7, 2025
Letter to The Goodyear Tire & Rubber Company
The SEC rejected an attempt by Goodyear Tire & Rubber to exclude from its annual proxy statement a shareholder proposal relating to microplastics. The proposal was brought by shareholder advocacy group As You Sow and seeks to require the tire manufacturer to report on goals and timelines for reducing tire shedding and the resulting microplastic pollution.
Goodyear sent a letter to the SEC arguing that the proposal should be excluded from the proxy statement because it “deals with a matter relating to the Company’s ordinary business operations and impermissibly seeks to micromanage the Company.” The SEC disagreed, finding that Goodyear had failed to demonstrate that the proposal related to the company’s ordinary business operations. Shareholders voted against implementing the proposal at the company’s annual meeting.
SEC Loosens Guidance on Proxy Exclusions
February 12, 2025
Staff Legal Bulletin No. 14M
The SEC issued a staff legal bulletin clarifying its interpretation of Rule 14a-8 promulgated under the Securities Exchange Act, which governs the types of shareholder proposals that can be omitted from proxy statements. Companies can exclude shareholder proposals from their proxy statements when they deal with a company’s “ordinary business operations.” However, such proposals must nonetheless be included if they relate to a significant policy issue. Under previous guidance, the SEC had increasingly denied exclusion requests, leading to an increase in shareholder proposals on environmental and social issues such as worker rights and climate change.
The new guidance instructs SEC staff, in determining whether a proposal relates to a significant policy issue, to “take a company-specific approach in evaluating significance, rather than focusing solely on whether a proposal raises a policy issue with broad societal impact.”
SEC Charges Former CEO for Failure to Disclose Settlements to Board
January 10, 2025
Vince McMahon, Former CEO of WWE, Charged for Failure to Disclose to WWE Two Settlement Agreements He Executed on Behalf of WWE
The SEC entered a settlement agreement with Vince McMahon, CEO of World Wrestling Entertainment Inc. (WWE), for failing to disclose two settlement agreements related to personal relationships between McMahon and individuals who were employed by WWE. The settlements, totaling over $10 million, secured the release of claims against McMahon and WWE by the two individuals, one of whom accused McMahon of unlawful conduct. According to the SEC, the nondisclosure of the settlement agreements led to accounting discrepancies that in turn caused the company to make material financial misstatements.
The SEC’s order found that McMahon violated Section 13(b)(5) of the Securities Exchange Act by “knowingly circumventing WWE’s internal accounting controls” and “making or causing to be made false or misleading statements to WWE’s auditor.” McMahon agreed to pay a fine of $400,000 to the SEC and reimburse WWE $1.3 million.
2024 Actions
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SEC Finds Investment Adviser Failed to Adhere to Its Investment Criteria for ESG-Marketed Funds
October 21, 2024
In the Matter of WisdomTree Asset Management Inc., No. 3-22268.
The SEC brought charges against New York investment adviser WisdomTree Asset Management Inc. for making misstatements about how its investment strategy incorporates ESG factors to avoid investing in “controversial products or activities.” In prospectuses for three exchange-traded funds, WisdomTree represented to investors that the funds were ESG-focused and would not invest in companies involved in industries such as fossil fuels or tobacco. However, the three funds in fact invested in companies that were involved in such industries, including coal mining and the retail sale of tobacco products.
The SEC’s order found that WisdomTree paid for a report from a third-party vendor to identify companies involved in fossil fuels and other industries and that the vendor’s reports did not identify all companies involved in the targeted industries. WisdomTree became aware that its screening process was not identifying all companies involved in the targeted industries in September 2020, but it did not amend the prospectuses for the three funds until November 2022. In addition, the SEC found that WisdomTree failed to adopt and implement written policies and procedures designed to prevent violations of the Investment Advisers Act of 1940. The SEC also found that WisdomTree had violated the antifraud provisions of the Advisers Act and Investment Company Act of 1940. WisdomTree agreed to pay a civil penalty of $4 million to resolve the charges.
SEC Settles Pod Recycling Claims
September 10, 2024
In the Matter of Keurig Dr Pepper Inc., No. 3-22100
The SEC accepted an offer of settlement from Keurig over Keurig’s statements about the recyclability of its K-Cup pods. Keurig had conducted research that indicated environmental concerns factored into some consumers’ decisions to purchase a Keurig brewing system. The pods represented a significant percentage of net sales of Keurig’s coffee segment, and the coffee segment represented a significant percentage of net sales across all of Keurig’s business segments. In its Forms 10-K for fiscal years 2019 and 2020, Keurig stated it had conducted extensive testing to ensure its pods could be successfully recycled. The SEC found that Keurig had omitted from these Forms 10-K that two of the largest recycling companies in the United States, collectively operating more than one-third of the recycling facilities nationwide, told Keurig they would not accept pods at their recycling facilities because there was not sufficient commercial benefit for recycling the pods. As a result, the SEC determined that Keurig’s statements about the recyclability of its pods were incomplete and inaccurate and charged Keurig with violating Section 13(a) of the Exchange Act and Rule 13a-1. Keurig agreed to pay a $1.5 million civil penalty to settle the SEC’s charges.
Lawmakers Encourage SEC to Finalize Greenwashing Rule
June 4, 2024
Letter to Chair Gary Gensler
A number of lawmakers from both the House and Senate filed a letter on June 4, 2024 encouraging Securities and Exchange Commission (SEC) Chair Gary Gensler to ensure robust enforcement of existing SEC guidance on climate disclosure while the SEC’s final climate risk disclosure rule is stayed. The letter notes that recent economic data suggests that climate change poses systemic risks to the national and global economy and argues that investors need access to reliable, standardized climate risk disclosures to fully evaluate the risks associated with their investments. The letter criticizes the SEC for adding a materiality qualifier to the final rule’s emissions disclosures, which provides issuers with discretion to decide if their emission levels reach a materiality threshold and should be disclosed.
SEC Stays Climate Disclosure Regulations Following Circuit Court Decisions
April 4, 2024
In the Matter of the Enhancement and Standardization of Climate-Related Disclosures for Investors, No. 33-11280
March 21, 2024
In re Securities and Exchange Commission, The Enhancement and Standardization of Climate-Related Disclosures for Investors, MCP No. 180
The SEC has issued a stay of its climate-related disclosure rules that were promulgated on March 6, 2024. Immediately after the final rules were published, several plaintiffs filed petitions seeking review of the rules in multiple courts of appeals. In response to the petitions, the Fifth Circuit issued an administrative stay of the final rules on March 15, 2024, which was dissolved after the Judicial Panel on Multidistrict Litigation consolidated the pending petitions in the Eighth Circuit. In its order issuing the stay, the SEC made clear that it is not departing from the view that the final rules are consistent with applicable law and within its authority to regulate corporate disclosures.
Energy Company Sues SEC over Climate Disclosure Regulations
March 28, 2024
Liberty Energy Inc. v. Securities and Exchange Commission, No. 3:24-cv-00739 (N.D. Tex.)
Liberty Energy Inc., an oilfield services firm, filed suit against the SEC challenging its authority to implement climate-related disclosure rules. The suit was filed to preserve the plaintiff’s rights while its challenge to the entire climate-related rule is pending in the Eighth Circuit after the Judicial Panel on Multidistrict Litigation consolidated Liberty Energy’s claims with similar claims by other plaintiffs in the Eighth Circuit. The complaint alleges that the SEC’s climate-related rule violates the major questions doctrine and that the SEC lacks clear authority for the rule. The complaint further alleges that the SEC’s climate-related rule violates the First Amendment because it requires disclosure of political issues.
Electric Truck Manufacturer Settles SEC Enforcement Disputing Demand for Its Electric Pickup Trucks
February 29, 2024
In the Matter of Lordstown Motors Corp., No. 3-21875
Lordstown Motors Corp., a former SPAC target, promoted itself to investors as developing the first-to-market full-size electric pickup truck in the commercial fleet market. The SEC enforcement action was built on the premise that Lordstown knew the first-mover advantage in the electric pickup truck space would be crucial to the company’s success, and so misrepresented the number of pre-orders for the truck and its access to key parts in the truck’s manufacturing. Lordstown claimed in investor roadshows that it had secured 27,000 pre-orders for the electric truck and that Lordstown allegedly had an agreement with General Motors that would allow Lordstown access to certain GM parts. The SEC order notes that between 40% and 71% of the pre-orders were from intermediaries that promised to influence purchases of the electric truck and did not intend to buy the electric truck themselves. The SEC order also states that Lordstown’s representations about maintaining access to certain GM parts was misleading because GM had allegedly informed Lordstown that its requests for GM parts would constrain GM’s supply chain and advised Lordstown to find a backup solution. Lordstown has agreed to pay disgorgement of $25.5 million to settle two pending class actions in Delaware and Ohio.
SEC Division of Enforcement Director Remarks on ESG: “We Are Merit Neutral”
February 23, 2024
SEC Division of Enforcement, Remarks at Ohio State Law Journal Symposium 2024: ESG and Enforcement of the Federal Securities Laws
Gurbir Grewal, director of the SEC Division of Enforcement, spoke on the SEC’s ESG enforcement actions, noting at the outset that the SEC is not an environmental regulator. Grewal commented that as investors become more interested in companies’ ESG considerations, companies have more incentives to exaggerate or make misleading statements about their positive ESG developments or to downplay or omit disclosures about negative ESG developments. Grewal discussed the Vale S.A. and Deutsche Bank enforcements as recent successes the SEC has had in ESG-related enforcement actions.
2023 Actions
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Deutsche Bank Agrees to Pay Penalty to SEC Related to ESG Investment Policies
September 25, 2023
In the matter of DWS Investment Management Americas, Inc. File No. 3-21709
Deutsche Bank’s American investment advisor subsidiary (“DWS”) has agreed to pay a $19 million fine to the SEC in connection with disclosures regarding the investment advisor’s ESG policies and proprietary “DWS ESG Engine.” The SEC alleged that DWS made materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations, and that DWS did not have policies in place reasonably designed to ensure its public statements about the use of ESG factors in investment decisions were accurate. DWS allegedly lacked policies and procedures to ensure the ESG Integration Policy was consistently followed by investment professionals, that investment professionals consulted the “DSW ESG Engine,” or that investment professionals incorporated ESG issues in valuation models or investment recommendations.
Brazilian Mining Company Settles with SEC over Misrepresentations in ESG-Related Disclosures
March 28, 2023
Securities and Exchange Commission v. Vale S.A., No. 1:22-cv-02405
Vale S.A., a publicly traded Brazilian mining company, agreed to pay $55.9 million to the SEC to settle charges related to disclosures of the safety of Vale’s dams. The settlement includes $25 million in disgorgement of alleged ill-gotten profits. The allegedly false disclosures were issued before the January 2019 collapse of Vale’s Brumadinho dam, which killed 270 people. The SEC alleged that Vale knew that the Brumadinho dam, which was built to contain potentially toxic byproducts from iron ore mining, did not meet internationally recognized standards. However, Vale’s annual sustainability report stated that Vale adhered to the “strictest international practices” in dam safety. The SEC’s investigation was conducted by the Climate and ESG Task Force in the Division of Enforcement, which was formed in March 2021 to identify material gaps or misstatements in ESG disclosures.
2022 Actions
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SEC Charges Goldman Sachs Asset Management for Failing to Follow Its Policies and Procedures Involving ESG Investments
November 22, 2022
In the Matter of Goldman Sachs Asset Management, L.P., No. 3-21245
The SEC charged Goldman Sachs Asset Management for failing to follow certain policies and procedures for investments marketed as ESG investments. To settle the charges, GSAM agreed to a cease-and-desist order, a censure, and a $4 million penalty.
SEC Charges Compass Minerals for Misleading Investors About Its Operations at World’s Largest Underground Salt Mine
September 23, 2022
In the Matter of Compass Minerals International, Inc., No. 3-21145
The SEC charged Compass Minerals International Inc. for misleading investors about costs for a technology upgrade at the world’s largest underground salt mine, near Ontario, Canada, as well as failing to properly analyze the financial risks of contamination at one of its former facilities in Brazil. To settle the charges, Compass Minerals was ordered to pay $12 million and agreed to cease and desist from further violations.
SEC Charges BNY Mellon Investment Adviser for Misstatements and Omissions Concerning ESG Considerations
May 23, 2022
In the Matter of BNY Mellon Investment Adviser, Inc., No. 3-20867
The SEC charged BNY Mellon Investment Adviser Inc. for misstatements and omissions in ESG quality reviews for certain investments. To settle the charges, BNY Mellon Investment Adviser agreed to a cease-and-desist order, a censure, and a $1.5 million penalty.
SEC Charges Brazilian Mining Company with Misleading Investors About Safety Prior to Deadly Dam Collapse
April 28, 2022
Securities and Exchange Commission v. Vale S.A., No. 22-cv-02405
The SEC charged Vale S.A., a Brazilian mining company and iron ore producer, for making false and misleading claims in its sustainability reports and other ESG disclosures regarding the safety of its Brumadinho dam, which collapsed in 2019 and killed 270 people.
2021 Actions
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Nikola Corporation to Pay $125 Million to Resolve Fraud Charges
December 21, 2021
United States Securities and Exchange Commission v. Trevor R. Milton, No. 1:21-cv-06445
The SEC charged Trevor Milton, founder of Nikola Corporation, for making false and misleading statements about Nikola’s products, technological accomplishments, and commercial achievements. Nikola was founded with the goals of manufacturing trucks that run on alternative fuels with low or zero emissions and building an alternative fuel station infrastructure to support such vehicles. Nikola agreed to a cease-and-desist order, certain voluntary undertakings, and a $125 million penalty. The SEC’s order also established a Fair Fund to return penalty proceeds to victim investors.
SEC Charges Founder of Nikola Corp. With Fraud
July 29, 2021
United States Securities and Exchange Commission v. Trevor R. Milton, No. 1:21-cv-06445
The SEC charged Trevor Milton, founder of Nikola Corporation, for making false and misleading statements about Nikola’s products, technological accomplishments, and commercial prospects. Nikola was founded with the goals of manufacturing trucks that run on alternative fuels with low or zero emissions and building an alternative fuel station infrastructure to support such vehicles. Milton falsely claimed, inter alia, that Nikola had developed a successful semi-truck prototype, an electric pickup truck prototype, and a “game-changing” battery technology, had billions of dollars of orders at a price point 20-30% below that of diesel vehicles, and was producing hydrogen at a cost four times lower than the prevailing market rates. In December 2021, Nikola agreed to a cease-and-desist order, to certain voluntary undertakings, and a $125 million penalty. The SEC’s order also established a Fair Fund to return penalty proceeds to victim investors.
SEC Obtains Emergency Asset Freeze, Charges Colorado Resident with Fraud Involving Sham Bottling Company
March 19, 2021
Securities and Exchange Commission v. Chatfield PCS Ltd. et al., No. 1:21-cv-00641
The SEC brought an emergency enforcement action to stop offering fraud and misappropriation of investor assets by Tra Jay Scarlett through his companies Chatfield PCS Ltd. and GO ECO Manufacturing Inc. The SEC alleged that Scarlett and Chatfield made false and misleading statements to investors, raising at least $3.2 million, by falsely marketing that GO ECO was an environmentally friendly protein-drink bottling and manufacturing company when, in fact, GO ECO had no active business operations. On March 30, 2022, the SEC obtained a final judgment that ordered the defendants to pay over $5 million in penalties, disgorgement, and prejudgment interest.
2020 Actions
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Fiat Chrysler Agrees to Pay $9.5 Million Penalty for Disclosure Violations
September 28, 2020
In the Matter of Fiat Chrysler Automobiles N.V., No. 3-20092
The SEC found that Fiat Chrysler violated reporting provisions of federal securities laws by making misleading disclosures about an internal audit of its emissions control systems confirming that its vehicles are compliant with all environmental regulations. Fiat Chrysler did not sufficiently disclose the limited scope of its internal audit, which did not address several issues raised by EPA and did not constitute a comprehensive review of its compliance with U.S. emissions regulations. Fiat Chrysler agreed to cease and desist and to pay a $9.5 million penalty. The SEC also created a Fair Fund to distribute the penalty to harmed investors and issued an order in November 2021 approving a proposed plan of distribution.