Last week, Matt Levine told a story about how far some investors will go (legally) to find hidden information about a company and what is behind numbers companies publish. Investors, he said, seek
“that sweet spot of information that is not widely known but that you can obtain without anyone violating any duties of confidentiality. The classic example is satellite photos of cars in parking lots: Those tell you something about retail sales that has not yet been publicly announced, but that is not misappropriated from the company.
The really interesting case, though, is information that (1) comes from the company, (2) is not publicly announced and (3) is revealed to you by accident. That sort of falls into a gap in the rules. (Very not legal advice!) The company didn’t violate any duties of confidentiality in giving you the information, and you didn’t violate any duties of confidentiality by trading on it. Just a weird accident.”
He provides an example of pharmaceutical company Amgen:
“data spotted by an analyst at Cantor Fitzgerald focused on concerns about potential side effects with [Amgen’s lead obesity candidate], called MariTide. Once they were shared widely in an investor note, the company’s shares fell 7%, a reminder that its stock is in a highly precarious position ahead of a critical readout of the therapy. Analyst Olivia Brayer found the data, which were previously unreported, in hidden tabs of a file attached to a Nature Metabolism publication of early trial results for MariTide. The hidden tabs contained what appeared to be results showing study participants experiencing loss of bone mineral density, especially among those in the group taking the highest doses of the drug, Brayer said.”
More companies claim that ESG, sustainability and climate are financially material – and many investors include that data in the “mix of information” they use to make decisions. Even though the matters may be considered material, associated data tends not be managed and controlled in a commensurate manner, meaning the risk is high for unintentionally disclosing ESG, sustainability and climate data.
ESG leaders, staff and advisors: There are many avenues for inadvertent public release of your company’s ESG, sustainability and climate data. While perhaps not illegal or creating an insider trading risk, it is still problematic. Avenues for potential unwanted publication of sensitive information can include:
- conference and seminar presentations,
- use in prompts in publicly-accessible AI systems like chatGPT, Claude and Perplexity,
- published papers and case studies,
- preliminary results of GHG emissions technology testing,
- examples published by consultants, other service providers, industry associations, or certification bodies,
- LinkedIn posts and comments, and
- benchmarking and preparing for formal disclosures such as the EU CSRD.
As I said a few weeks ago, while the Holy Grail for most ESG/sustainability professionals is for their work to rise to the level of financial materiality, that comes with burdens unfamiliar to those without securities law backgrounds. Work with securities counsel to clearly and specifically determine what is material and how related data/information therefore must be managed.
Members can learn more about disclosures here.
If you aren’t already subscribed to our complimentary ESG blog, sign up here for daily updates delivered right to you.
