Climate change science is back in the headlines and social media. New York is attempting to use its powers under the Martin Act to investigate prior corporate disclosures on climate change. In early November, New York Attorney General Eric Schneiderman issued a subpoena to Exxon and sources say New York is investigating Exxon’s disclosures to the Securities and Exchange Commission (SEC) in light of recent allegations that Exxon suppressed internal investigations on climate science over the last 40 years. The Exxon investigation follows on the heels of Los Angeles Times and InsideClimate reviews of Exxon archived documents earlier this year. According to Exxon, these reports distort ExxonMobil’s history of climate research through selective, out-of-context use of publicly available company documents. Exxon has made the documents available on its website so that readers can make their own evaluation.
New York also completed another climate change-related Martin Act investigation this month. Attorney General Schneiderman reached an agreement with Peabody Energy after several years of investigation of Peabody’s disclosures on climate change under the Martin Act. As part of the settlement, Peabody Energy will have to revise its shareholder disclosures to include statements that “concerns about the environmental impacts of coal combustion . . . could significantly affect demand for our products or our securities.” This regulatory activity has put the spotlight back on what companies may need to include in their corporate disclosures on climate change and whether these disclosures or required changes to them are a source of liability.
What could this regulatory action mean for your company?
- Increased cost of defending media allegations, regardless of ultimate merit
- Increased scrutiny of all corporate disclosures including non-voluntary and voluntary disclosures (e.g., SEC, FTSE, Carbon Disclosure Project, NAIC)
- Potential for more investigations under the Martin Act
- Questions about insurance (for insurers, is there any exposure and for insureds, is there any coverage?)
- Increased shareholder action
- The potential for follow-on lawsuits
- Possible SEC and Justice Department investigations of SEC disclosures
For more background information on this topic, please see our prior publications analyzing corporate climate change disclosures and predicting that New York could use its broad powers under the Martin Act to investigate climate change-related issues: