Legal Alerts

SEC Enforcement Case Ups the Ante on Corporate ESG Disclosures

Washington D.C. (May 4, 2022) - From the earliest days of the Biden Administration, the Securities and Exchange Commission (SEC) signaled its intention to use all the tools at its disposal to address investor disclosures of Environmental, Social, and Governance (ESG) information. In March 2021, the SEC established a high-profile enforcement-focused Climate and ESG Task Force. Then, on April 11, 2022, the SEC published a proposed rule (with comments due by May 20, 2022) that will require detailed disclosures about greenhouse gas emissions, climate-related risks and targets, and corporate oversight and governance matters.

On April 28, 2022, the SEC took another major step in its campaign to “to proactively identify ESG-related misconduct” when it filed a civil enforcement action in federal court in New York, alleging that the Brazilian mining company Vale S.A. had committed securities fraud by misleading investors in public ESG disclosures between 2016 and 2019. The complaint charges that the company’s misleading disclosures concealed “environmental and economic risks” associated with a containment dam that collapsed, killing 270 people. It further alleges that this conduct deprived investors of the ability to make informed investment decisions on Vale’s securities while allowing the company to raise more than $1 billion in the U.S. debt market.

This enforcement action should leave no doubt in anyone’s mind that ESG disclosures represent a major area of legal risk that businesses must take serious steps to address.

Specific Allegations

The SEC’s complaint focuses on the company’s alleged knowledge that its Brumadinho dam, which was built to contain mining waste, was not built and maintained in conformity with prevailing engineering and safety standards. Despite this knowledge, the SEC’s press release alleges, the company “manipulated multiple dam safety audits; obtained numerous fraudulent stability certificates; and regularly misled local governments, communities, and investors about the safety of the Brumadinho dam through its . . . ESG disclosures.” Those disclosures included investor presentations and SEC filings, sustainability reports, president and CEO public comments, and an ESG webinar published on the company’s website. The SEC’s Enforcement Division Director Gurbir Grewal stated, "By allegedly manipulating those disclosures, Vale compounded the social and environmental harm caused by the Brumadinho dam’s tragic collapse and undermined investors’ ability to evaluate the risks posed by Vale’s securities."


Although the SEC has headlined the case as its first ESG prosecution, the alleged law violations are based on longstanding antifraud and reporting requirements established under existing securities laws, and seek typical remedies including injunctive relief, disgorgement plus prejudgment interest, and civil penalties. While some have argued that the SEC lacks authority for ESG initiatives like its proposed disclosure rule, it seems clear that the SEC feels confident and ready to take enforcement action against “ESG-related misconduct” based on existing laws and regulations.

The recently filed complaint signals the SEC’s aggressive intent to prosecute materially false or misleading statements on ESG-related matters in disclosure materials. The Climate and ESG Task Force’s website specifically solicits – and provides a direct link to submit – tips, referrals, and whistleblower complaints, which is another indication of the high degree of interest in pursuing ESG disclosure misconduct. Businesses should take these warnings seriously and review all ESG-related disclosures, reports, webinars, marketing materials, and public statements to ensure accuracy and full compliance with securities laws.

In addition, interested parties should pay close attention to the SEC’s proposed rule, which will likely broaden ESG disclosure requirements and create additional legal risk. 

Lewis Brisbois’s Sustainability and ESG Practice attorneys work with clients to navigate emerging legal issues and effectively manage business risk. For more information, contact the authors of this alert. Visit our Sustainability & ESG Practice page for more alerts in this area.


Jane C. Luxton, Managing Partner - Washington, D.C.

Karen C. Bennett, Partner

Sean P. Shecter, Partner

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