ESG debates move to courts (2023)
| Environmental, social, and corporate governance |
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At a recent conference in Montreal, Canada, speakers argued that ESG-related class-action lawsuits are likely to play a growing part in the debate over ESG and its value to investors, shareholders, and customers. According to a report on the conference, “class action litigation can emanate from many sources, [but] four areas in particular are of importance in the ESG space,” including shareholder lawsuits and government enforcement litigation:
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Shareholders: Lawsuits by shareholders regarding ESG matters are accelerating. Examples include claims that their stock holdings have lost value as a result of false disclosures about issues like sexual harassment allegations involving key executives, cybersecurity incidents, or environmental disasters. Even absent a stock drop, some shareholders have brought successful derivative suits focused on ESG issues. Of recent note, employees of corporations incorporated in Delaware who serve in officer roles may be sued for breach of the duty of oversight in the particular area over which they have responsibility, including oversight over workplace harassment policies …. The decision will likely result in a flurry of litigation activity by the plaintiffs’ bar, as new cases will be filed alleging that officers in corporations who were responsible for overseeing human resource functions can be held liable for failing to properly oversee investigations of workplace misconduct such as sexual harassment. … Government Enforcement Litigation: Federal, state and local government regulators have taken multiple actions against companies based on their alleged participation in climate change, investments inconsistent with ESG goals, or alleged illegal activities. For instance, in 2019, the U.S. Department of Justice investigated auto companies for possible antitrust violations for agreeing with California to adopt emissions standards more restrictive than those established by federal law. While the investigation did not reveal wrongdoing, it underscores the creativity that proponents and opponents of ESG efforts can employ.[1] |
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The report suggested that the increased litigation risk was unlikely to reduce corporate ESG programs:
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The creation, content, and implementation of ESG programs carries increasing litigation risks for corporations but it is unlikely that ESG programs will diminish is (sic) size or scale in the coming years given increased focus by Fortune 100s and 500s and increased regulation at the federal and state levels.[1] |
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See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
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