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Keeping you in-the-know on environmental, social and governance developments

This past Tuesday, the SEC fined mining company Vale S.A.

“… $55.9 million to settle charges brought last April stemming from the company’s allegedly false and misleading disclosures about the safety of its dams prior to the January 2019 collapse of the Brumadinho dam that killed 270 people. The SEC’s complaint alleged that, for years, the dam did not meet internationally-recognized safety standards even as Vale’s public sustainability reports assured investors that all of its dams were certified as stable…

Mark Cave, Associate Director of the SEC’s Division of Enforcement [said] ‘The terms of today’s settlement, if approved by the court, will levy a significant financial penalty against Vale and demonstrate that public companies can and should be held accountable for material misrepresentations in their ESG-related disclosures, just as they would for any other material misrepresentations.'”

This is another (and pretty big) indication that SEC is (a) considering financial materiality of ESG matters and (b) cross-referencing SEC filings with corporate sustainability/ESG reports. I wrote earlier this month:

“Since ESG reporting is voluntary in the U.S. at the moment, there is an argument to be made that it is okay to not apply the same processes as for legally-required reporting. But recent SEC enforcement actions make it clear that this is changing and you might need to seriously rethink your current ESG reporting controls.”

The Vale settlement is evidence of exactly that. You might want to determine if any potential inconsistencies exist between your company’s ESG disclosures and financial statements. Not only is there the risk of SEC enforcement directly, but it bears noting that investors and ESG ratings rely on corporate ESG reports to make decisions. Should they find inconsistencies, you could be liable for additional claims and litigation.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for almost 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one… View Profile