ESG Litigation Heats Up In Marketing, Climate Pollution, And DEI - Securities - United States

[Gunnar Larson]

MLK said, Gunnar, duck and run.

So interesting that in New York our Civil Rights have been ignored, for
fear of historic litigation (as one of the world’s most controversial
journalists in litigation investment).

But, no, we have chosen to innovate rather than litigate.

The United Nations is probably the world's most pervasive fraud in ESG
malfeasance, and that is something Bank.org is happy to make history with.

With the situation in Chelsea, I also think the FBI CFO's Civil Rights has
been abused with an "All Electric Tower" via a $2B windmill project
financed by five time felons at JPMORGAN. Who, by the way bank the United
Nations.

These rights abuses are very well known by the FBI, NYPD, DHS and New York
Attorney General. Yet, NY-DFS is the best regulator on the planet to make
all this exciting and historic ...

"For example, the Securities and Exchange Commission recently created a
Climate and ESG Task Force. The Southern District of New York launched a
civil rights unit in its criminal division, and the Environmental
Protection Agency instituted the Office of Environmental Justice and
External Civil Rights."

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As more regulatory agencies create ESG-focused task forces, ESG-related
enforcement actions and litigation are steadily increasing. Katten
attorneys analyze trends and enforcement targets.

As more regulatory agencies develop task forces focused on environmental,
social, and governance oversight, the potential for ESG-related enforcement
actions is steadily increasing.

For example, the Securities and Exchange Commission recently created a
Climate and ESG Task Force. The Southern District of New York launched a
civil rights unit in its criminal division, and the Environmental
Protection Agency instituted the Office of Environmental Justice and
External Civil Rights.

Each newly minted federal regulatory task force will give rise to greater
ESG-related enforcement action.

But governmental actions are simply one aspect of the ESG landscape that
will be very active this year. For example, we also expect increased
shareholder derivative lawsuits, consumer protection litigation, suits by
environmental advocacy groups, employment discrimination claims—individual
and class—and other private action litigation.

Green Marketing
Green marketing, including promotion of environmentally friendly products
or services, is under increased scrutiny. Although consumer goods have long
been the target of allegations of false or misleading marketing claims,
these claims are on the rise in the green marketing space.

As consumers become more interested in the environmental attributes of
products and services, they may seek to base purchase decisions on
advertised "green" benefits.

Although some marketing jargon may seem benign at first glance, companies
should be cautious of overstating, misleading, or providing inaccurate
environmentally friendly claims that could give rise to litigation. This is
understandably challenging in the evolving ESG landscape.

For example, consumers have an increased expectation of transparency as it
relates to carbon emissions reduction, but this can be achieved directly,
by reducing emissions from manufacturing, sourcing, and transport.

Or, it can be achieved through the purchase of carbon offsets—carbon
reduction credits that represent the impact of beneficial projects
somewhere else in the world—which are applied to reduce a company's net
emissions.

Danone Waters is litigating a consumer protection lawsuit alleging that
that the "carbon-neutral" claim on the label of Evian water is false and
misleading.

The plaintiffs assert that a reasonable consumer would interpret the
carbon-neutral label to mean that no carbon dioxide was released in the
manufacturing of Evian products—which is most likely unreasonable, given
the likelihood that no product production can claim to be totally
carbon-free.

Danone Waters achieves carbon neutrality by purchasing carbon offsets.
However, the plaintiffs have attacked the carbon-offset verification
process as unreliable.

As consumer expectations around carbon neutrality evolve, companies may
have to revise their carbon neutrality claims to maintain customer trust
and reduce potential litigation risks.

Similarly, words such as "clean," which were once perceived as innocuous
green marketing jargon, are also false advertising claims.

Currently, a utility company is fighting claims that it deceptively
advertises natural gas as a "clean" source of energy, when natural gas
combustion emits methane—a greenhouse gas that has been linked to climate
change.

Because green marketing consumer expectations are evolving, companies
should work in concert with legal counsel to remain on par with current
market trends.

Climate Pollution
Companies that pollute continue to be the target of lawsuits brought by
environmental advocacy groups and state agencies.

In recent years, states and cities brought several lawsuits against oil and
gas companies alleging that these companies knowingly made false and
misleading statements regarding the extent their products contribute to
pollution.

An environmental advocacy group recently sued a manufacturing company
claiming that its production facility was polluting the Merrimack River in
violation of the Clean Water Act.

These actions reflect the importance of companies understanding their
pollution output and devising a sustainable plan with various stakeholders
to reduce that output over time.

Diversity, Equity, and Inclusion
ESG-related employment discrimination and shareholder derivative lawsuits
related to DEI missteps are also increasing. Recently, a proposed class
action lawsuit alleged that a social media company's recent layoffs
disproportionately affected women.

Layoffs under any circumstance are tough, and ripple effects may not be
revealed until months or years later. Yet, it is imperative that companies
adopt controls to ensure layoffs do not produce an unintentional,
disproportionate impact to protected classes.

Since 2020, over a dozen corporations have faced shareholder derivative
lawsuits based on their allegedly misleading statements about their
commitment to diversity and equity.

These lawsuits typically allege that the corporation's directors breached
their fiduciary duties by failing to ensure the corporation complied with
anti-discrimination laws or by authorizing false statements in public
materials regarding the corporation's commitment to diversity and inclusion.

Although these derivative lawsuits have faced significant legal obstacles
and many have been dismissed, shareholders continue to pursue these claims.
DEI is no longer solely the responsibility of diversity officers—it is an
important ESG risk management function.

DEI missteps or failings can lead to costly private litigation, which can
be avoided with proper controls.

These cases emphasize the importance for corporations to appropriately
embed ESG principles into their business operations and adequately reflect
their commitment to customers, employees, and other stakeholders.

Originally Published by Bloomberg Law
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