US ESG Battle Now Shifts to Courts

At the start of last month, the U.S. Securities and Exchange Commission (“SEC”) revealed that it would take more time in the implementation of new reporting rules for public companies as they dealt with the courts. This comes after the U.S. Court of Appeals for the Fifth Circuit halted the change, within days of adoption. The rules, which touch on environment, social and government (“ESG”) issues, are being challenged in other federal courts and by different groups.

For instance, workers supported by right-wing groups in New York have filed a lawsuit accusing the state’s pension managers of breaking their fiduciary duty for moving from investing in fossil-fuel companies. In California, the U.S. Chamber of Commerce is suing to block the new carbon disclosure regulations from implementation. The disclosures focus on carbon emissions along a company’s supply chain, and while companies are already reporting their emissions, some are worried that the data may not be accurate, which will make it harder to validate.

Seyfarth Shaw LLP recently released an analysis of litigation risks in the United States, with ESG being named as a major threat. Giovanna Ferrari, a partner at the company, explained that as companies disclosed their ESG efforts more, they risked claims that their metrics or achievements constitute omissions or misstatements that violate securities laws.

Ferrari also noted that the suit filed in New York was one to keep an eye on, particularly since city employees alleged that pension plans had violated their fiduciary duty by divesting from fossil fuels, which affected workers’ retirement funds. In its statement, the city claims that more money has been made for pensioners simply by the decision to move away from fossil fuels.

Even if one case is dismissed, it is expected that conservative lawyers and political activists will continue to file suits such as this one.

The same cannot be said for the United Kingdom and European Union. These regions have committed to strong ESG disclosure standards. Certa CEO and founder, Jagmeet Lamba, revealed that Sustainable Finance Disclosure Regulations in the United Kingdom were driving business greatly. He added that companies that weren’t prepping for climate-related disclosures were getting left behind. Lamba advised companies to start strengthening their reporting infrastructure while the industry was still young, with a focus on ensuring that ESG was handled by an individual passionate about impact and ESG and using flexible software that can grow and adapt with one’s growth and success.

The companies that are already implementing ESG, such as Reflex Advanced Materials Corp. (CSE: RFLX) (OTCQB: RFLXF), can provide pointers to those that are just starting out on this journey of integrating ESG principles within all operations.

NOTE TO INVESTORS: The latest news and updates relating to Reflex Advanced Materials Corp. (CSE: RFLX) (OTCQB: RFLXF) are available in the company’s newsroom at https://ibn.fm/RFLXF

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