Jurgita Ashley is a securities and corporate governance partner with Thompson Hine LLP, co-chair of the firm’s Public Companies group, and co-chair of the firm’s ESG Collaborative. David Wilson is an internal investigations, government enforcement, and securities and shareholder litigation partner with Thompson Hine LLP and partner in charge of the firm’s Washington, D.C. office.*


Calls for increased environmental, social and corporate governance (ESG) disclosures are growing exponentially. When providing them, companies should put in place systems to ensure that the disclosures are accurate and complete and implement litigation and enforcement safeguards.

Adding to demands from investors, employees and ESG rating organizations; legislative action in Europe and the United States; climate-based activity at state level; and the Biden administration’s focus on ESG issues is the U.S. Securities and Exchange Commission’s (SEC) new emphasis on climate and ESG disclosures. On March 4, 2021, the SEC announced the formation of a Climate and ESG Task Force in the Division of Enforcement. Soon thereafter, on March 15, 2021, the SEC announced a blueprint for reinvigorating climate and ESG-related disclosures in light of investor demand. Then SEC Chair Gary Gensler and other Commissioners released statements regarding ESG expertise on boards of directors and what form the climate and human capital disclosures may take in SEC filings. While the SEC has yet to initiate any definitive rule changes, proposed ESG rulemaking is currently on its agenda for October 2021, and its recent actions demonstrate a clear direction toward heightened sustainability reporting.

The SEC’s Climate and ESG Task Force is expected to initially focus on “identify[ing] any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules,” “analyz[ing] disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies,” and pursuing whistleblower tips on ESG-related issues. In addition, according to Law360, in July 2021, SEC Acting Director of Enforcement Melissa Hodgman noted that more ESG disclosure-related enforcement actions might be coming, potentially in cases “where there was a misstatement or something that wasn’t disclosed to investors that they needed to know to make [an] investment decision.”

Where disclosures are made in this burgeoning area as companies respond to the growing demands for ESG disclosures and navigate the challenges of what to disclose and how to disclose it, litigation is sure to follow. Litigation and regulatory activity related to ESG issues has already begun to take shape and is likely to evolve in the coming months and years. Potential areas for litigation include companies’ operations and governance arrangements, reporting, and officer and director claims for breach of fiduciary duties. Companies also have been subjected to “greenwashing” claims that dispute disclosures or claims that products or processes are environmentally friendly. Some recent lawsuits have challenged climate change disclosures and whether boards have adequately monitored their companies’ food safety practices, and others have alleged breaches by directors of their duty to ensure their companies’ commitments to diversity and anti-discrimination.

Particularly when including ESG disclosures in SEC filings, companies should recognize increased liability risks and ensure that the disclosures are accurate, appropriately cautioned, consistent with the company’s statements in sustainability reports and other forums, and carefully incorporated into the company’s disclosure controls and procedures. Some companies may see claims alleging that omitting certain ESG disclosures now rises to the level of a “material omission” or that general statements about ESG achievements include “material misstatements,” particularly during offerings or other transactional activities or when there are significant fluctuations in stock prices.

Now is the time to implement disclosure controls and prepare for what is on the horizon.

*The views expressed in this article are attributable to the authors and do not necessarily reflect the views of Thompson Hine LLP or its clients. This publication is provided for educational and informational purposes only and is not intended and should not be construed as legal advice.