Business

The U.S. securities regulator’s forays into climate change enforcement

The U.S. Securities and Exchange Commission (SEC) has created a task force to police statements made by companies and fund managers about climate-related risks. While the concerted push is a first for the agency, it has in the past pursued a handful of climate-change related enforcement actions, with mixed success.

BP PLC
The oil giant in 2012 agreed to pay $525 million to settle SEC allegations that on several occasions it significantly underestimated the volume of oil spilling from the Deepwater Horizon oil well in its investor communications, using a lower flow rate than what was known internally.

EXXON MOBIL CORP
In 2018, the SEC ended a two-year probe of Exxon Mobil’s oil reserves and climate-change disclosures after oil prices fell and as the threat of curbs on carbon emissions grew.

“We are confident our financing reporting meets all legal and accounting requirements,” an Exxon spokesman said at the time.

Around the same time, the New York Attorney General also probed Exxon’s accounting practices and in 2018 sued Exxon for allegedly hiding for years the true cost of global climate change regulation, but lost in court in 2019.

PAX WORLD MANAGEMENT CORP
The New Hampshire-based mutual fund manager in 2008 agreed to pay $500,000 to settle SEC charges it had bought 10 securities that the fund’s socially responsible investing restrictions prohibited it from owning.

That included investment in an oil and gas exploration company and securities that derived their revenue from the manufacture of weapons-related products, alcohol and gambling.

The company did not admit or deny the SEC’s findings as part of the settlement.

STELLANTIS, PREVIOUSLY FIAT CHRYSLER AUTOMOBILES
Last year, the automaker then known as Fiat Chrysler agreed to pay a $9.5 million penalty for misleading investors about the scope of an internal audit of its emissions control systems. The company did not admit or deny the findings as part of the settlement.

PEABODY ENERGY
The SEC examined Peabody’s disclosures following a New York state investigation launched in 2013 into whether the coal company’s public statements on climate-related risks violated state securities laws, according to a 2018 congressional report.

The New York Attorney General’s probe found Peabody told investors it had no ability to forecast risks from certain potential climate change laws and regulations, despite having made just such projections internally. Peabody agreed in a 2015 deal with the Attorney General to disclose those forecasts.

The SEC did not take action against Peabody.

VOLKSWAGEN AG
The SEC in 2019 charged Volkswagen and its former chief executive Martin Winterkorn for allegedly defrauding bond investors with a series of deceptive claims about the environmental impact of the car company’s “clean diesel” fleet.

The carmaker has paid out more than 30 billion euros ($35 billion) in fines and penalties for cheating emissions tests, which was uncovered by U.S. authorities in September 2015.

A U.S. judge last year dismissed SEC allegations that the company misled investors, but has not yet decided whether the SEC can still seek disgorgement of profits. The SEC is also pursuing related claims against Winterkorn.

VW and Winterkorn have denied wrongdoing.