WHEREAS: Shareholders must protect our assets against
potentially unfulfillable Company ESG promises, including the
extent to which the Company can reduce Scope 1, 2, and 3
greenhouse gas (GHG) emissions.
The Securities and Exchange Commission (SEC) has taken
enforcement actions related to Environmental, Social, Governance
(ESG) issues or statements by companies who misrepresent or
engage in fraud related to ESG efforts.1
In 2021, the SEC created the Climate and ESG Task Force in its
Division of Enforcement.2 The focus of the Task Force is “to
identify any material gaps or misstatements” in disclosure of
climate risks and analyze “compliance issues relating to
investment advisers’ and funds’ ESG strategies.”3
The Task Force has taken numerous enforcement actions
including charging Goldman Sachs for policies and procedures
failures related to ESG investments, resulting in a $4 million
penalty,4 and charging DWS Investment Management Americas
Inc. in part for misstatements regarding its ESG investment
process that resulted in an overall $25 million in penalties.5
The SEC has proposed to require companies to disclose
information about their Scope 1 and 2 emissions, and to require
them to disclose Scope 3 emissions “if material or if the registrant
has set a GHG emissions target or goal that includes Scope 3
emissions.”6
The Environmental Protection Agency defines Scope 3 emissions
as, “the result of activities from assets not owned or controlled by
the reporting organization, but that the organization indirectly
affects in its value chain.”7 Put differently, “Scope 3 emissions for
one organization are the scope 1 and 2 emissions of another
organization.”8 This means that Scope 3 emissions are already
counted as another entity’s emissions, and are external to the
reporting company, such as product use and how employees
commute.9
Voluntary carbon-reduction commitments create risk of SEC
enforcement without providing clear benefit to the climate or
other values.
In August 2023, the Global Climate Intelligence Group asserted,
“There is no climate emergency.”10 The declaration includes 1,609
signatories and “oppose[s] the harmful and unrealistic net-zero
CO2 policy proposed for 2050.”11
A June 2023 study by the Energy Policy Research Foundation
found that net zero advocates have misconstrued the
International Energy Agency’s position on new oil and gas
investment and that it has made questionable assumptions and
milestones for NZE about government policies, energy and carbon
prices, behavioral changes, economic growth, and technology
maturity.12