Bracewell’s Rachel Goldman, co-chair of the firm’s ESG practice, discussed with Law360 the US Securities and Exchange Commission’s recent settlement with DWS Investment Management Americas Inc. on allegations of misleading statements about its controls for incorporating ESG factors into research and investment recommendations for certain mutual funds and accounts.
Goldman said it’s clear the SEC is taking what companies say about their ESG efforts seriously. She said there was a sense at some point that ESG was just marketing, but “even if it ever was just marketing, it’s clear from what the SEC has been doing that it’s far from that now.” Goldman added, “It requires the same sort of rigorous review as the financial disclosures do.”
In the September 25 $19-million settlement — which came alongside a separate $6 million penalty in an anti-money laundering action against DWS — the SEC alleged DWS didn’t implement certain provisions of its ESG policy as it had led clients and investors to believe.
Goldman said the settlement shows the SEC is treating ESG statements the same way it treats financial statements. She added that the settlement reinforces the regulator’s message that firms need to ensure their actions conform to the material representations they make to investors.
“Your actions have to match your words, and if you discover that they don’t, you can’t leave representations that you’ve made out there suggesting otherwise, because now it’s become a false statement,” Goldman said.
Goldman added that while comparing how a firm’s actions align with its statements is consistent with how the SEC looks at financial disclosures, the DWS settlement goes a step further because the firm allegedly didn’t ensure employees followed its policy or used a pertinent tool.
“It’s not enough to say it. It’s not enough even to have a policy on it,” she said. “You really have to ensure that your employees and your company are following those policies and procedures.”
The SEC’s proposed rule, issued in March 2022, requires the disclosure of a range of data related to greenhouse gas emissions, the business risks associated with severe weather events and the transition to a smaller carbon footprint.
