Business

Big businesses trumpet the ESG logins. Surveillance is on the rise


As the 2020s progress, discussions about climate change, the environment, and issues related to equality and diversity are at the forefront of many people’s minds.

The corporate world is no exception, with banks, energy producers and a host of other large businesses wanting to generate information about their sustainability through advertisements, pledges, social media campaigns and a host of other initiatives.

Many of these claims are now viewed through the lens of the ESG, or environmental, social and governance.

It has become a hot topic in recent years, with many organizations trying to boost sustainability credentials – and public image – by developing business practices they deem appropriate. conforms to the ESG association criteria.

But here’s the catch: Definitions of ESG are often varied and difficult to define. That can create a headache for businesses looking to confront regulators and authorities.

Take a look at the situation in the UK. Chris Ross, a commercial partner at London-based law firm RPC, told CNBC via email: “One of the major complicating points in this area is that there is no overall regulation or regulation in the UK. UK administers ESG compliance.

“Rather, there’s a patchwork of domestic and international regulations.”

Those regulations, he said, are “administered by a diverse set of bodies” including the Corporate Regulatory Authority, the Pensions Regulatory Authority, the Financial Conduct Authority, the Environmental Authority, the Newspaper Council and the Financial Conduct Authority. financial statements and “under European law, the European Commission.”

Expanding on his point, Ross describes ESG as “a pollution term.”

It covers “a wide range of considerations, from issues related to climate and pollution through bribery and corruption, anti-money laundering, diversity and inclusion… health and safety, to modern slavery,” he said.

“Developing a universal definition is practically impossible, and in the near future, companies will need to ensure that they comply with a variety of relevant laws and regulations,” Ross added.

Monitoring, banning and fines

Today, companies that label their products or services as ESG, sustainable or similar are looking for their business practices and claims and are sought after by lawyers, the public, environmental organizations, and others. and very detailed inspection by regulatory authorities.

For example, at the end of August, an advertisement from a consumer goods giant Unilever as its Persil brand of laundry detergent has been banned by the UK’s Advertising Standards Authority.

In a detailed ruling, The ASA concluded that advertisements describing Unilever’s products as “kinder to our planet”, “potentially misleading” and “must not appear again in their current form”.

In a statement sent to CNBC, a spokesperson for Unilever said it was “surprised” by the ASA’s decision and that the ad “was removed for airing a number of times.”

“We acknowledge that this decision reflects an important and recent evolution in ASA’s approach to proving environmental claims and welcome the new standard that ASA is setting for advertisers. report,” the spokesman added.

“Persil will continue to lead dramatic environmental improvements in the laundry category and provide evidence to support ‘stainless removal, better for the planet’ for future campaigns in line with growing requirements.”

Read more about energy from CNBC Pro

In the United States, scrutiny of sustainability and ESG claims is also taking place.

In March 2021, the U.S. Securities and Exchange Commission announced the creation of an ESG and Climate Task Force within its Enforcement Division, stating that it would “proactively identify misconduct related to ESG.”

Since its inception, several big names have come under the radar of the task force, including BNY Mellon Investment Adviser.

In May, the regulator announced it had charged BNYMIA for “errors and omissions in Environmental, Social and Governance (ESG) considerations in making investment decisions for a number of mutual funds it manages.”

The SEC said its order found that “between July 2018 and September 2021, BNY Mellon Investment Advisors represented or implied in various statements that all investments in the fund have undergone an ESG quality assessment, although that is not always the case.”

“The order indicates that many investments held by certain funds did not have an ESG quality score at the time of investment,” it added.

The SEC said that BNYMIA neither admitted nor denied its findings, but agreed to a censorship, cease and desist order, and pay a total fine of $1.5 million.

In a statement sent to CNBC, a spokesperson for BNY Mellon said BNYMIA is “delighted to address this matter regarding certain statements they made regarding the ESG review process for six mutual funds.” support of the United States.”

“While none of these funds fall within the scope of BNYMIA’s ‘Sustainability’ fund, we take our legal and compliance responsibilities seriously and have updated our documentation as part of our commitment to ensure ensure that our communications with investors are accurate and complete,” the spokesperson added.

This image, from January 2019, shows a rescuer resting after a dam burst at a mine in Vale in Brumadinho, Brazil.

Mauro Pimentel | AFP | beautiful pictures

It’s not just the financial world that has caught the SEC’s attention.

In April, it charges Brazilian mining giant Vale for “making false and misleading statements about the safety of dams before the collapse of the Brumadinho Dam in January 2019.”

“The collapse killed 270 people” and “caused incalculable environmental and social harm,” the SEC said.

Among other things, the SEC complaint alleges that Vale “routinely misled local authorities, communities and investors about the safety of the Brumadinho Dam through revelations … about the environment, society and governance.”

When contacted by CNBC, Vale – has “ESG Portal” on its website – mentioned statement issued on April 28.

“Vale denies the SEC’s allegations,” the company said, “including the allegation that its disclosures violated U.S. law and will vigorously defend this case.”

“The company reiterates the commitment it made immediately after the dam failure and has guided the company since then on remedial and compensation for damage caused by the event.”

More greenwashing litigation

In June, the Grantham Institute for Climate Change and the Environment and the Center for Climate Change Economics and Policy published the latest edition of a The report examines trends in litigation on climate change. It highlights some of the key developments.

Globally, the cumulative number of climate change-related lawsuits has more than doubled since 2015.

“Just over 800 cases were filed between 1986 and 2014, and more than 1,200 cases were filed in the past eight years, bringing the total in the database to 2,002 cases,” it added. “About a quarter of these are filed between 2020 and 2022.”

The report also points to growing momentum on the washout front. “Climate-related greenwashing lawsuits or ‘climate cleanup’ lawsuits are picking up pace,” it said, “with the aim of forcing companies or states to be held accountable for their actions.” awareness of climate misinformation before domestic courts and other agencies.”

The debate around greenwashing is becoming increasingly intense, with fees often levied at multinationals with huge resources and significant carbon footprints.

It’s a term the UK environmental organization Greenpeace calls a “PR tactic” used “to make a company or product appear eco-friendly without reducing its environmental impact.” of it in a meaningful way.”

A continuing trend?

In Europe, the end of May saw Reuters report that the offices of wealth manager DWS and the headquarters of Deutsche Bank, its main owner, were raided by German prosecutors. Citing prosecutors, Reuters said the raids were linked to “allegations of misleading investors about ‘green’ investments.”

Deutsche Bank did not respond to CNBC’s request for a statement on the matter. in AugustThe DWS said the allegations reported in the media were “baseless”, adding that it sided with “annual report disclosures. Its fiduciary role on behalf of clients mine. “

This summer also saw a number of environmental organizations file lawsuits against the airline giant KLM.

In one Release announcement on July 6ClientEarth, one of the groups involved, said the lawsuit was filed “after the airline refused to stop advertising misleading claims that it was making flying sustainable.”

KLM, says on its website that it “committed to creating a more sustainable future for aviation,” did not respond to a request for comment.

For his part, RPC’s Chris Ross said high-profile lawsuits like the one against KLM demonstrate both the “willingness and resources to bring claims against large companies for scrutiny and review.” thoroughly their ESG statements.”

Expanding on his views, Ross also referred to the submission of a resolution at HSBC Bank by retail shareholders and institutional investors in February 2022.

“We can expect this trend of thorough surveillance and direct action to continue,” Ross added. “In that context, it is in the interest of organizations to ensure effective governance and strict compliance with ESG requirements to avoid, or at least reduce, the risk of litigation.”



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