Criminalizing ESG: A Framework to Hold Corporations Accountable for Incorrect ESG Disclosures

Anderson, Sierra | April 3, 2023

Investors are increasingly interested in corporate environmental, social, and governance (“ESG”) data, so the SEC has faced pressure to create a mandated ESG disclosure regime. The Commission has begun exploring ESG disclosures, including creating a dedicated task force and opening a public comment process. But, if the SEC wants to require corporations to provide investors with meaningful ESG data, it must be able to hold corporations civilly and criminally liable for providing false information—which hinges on ESG statements being material. This Comment analyzes what types of ESG data would likely be found material under current laws. After applying this information, this Comment concludes with various ways the SEC could utilize the materiality analysis to create a functional, standardized disclosure regime. This recommended framework would benefit investors by providing key ESG information while ensuring that the SEC and DOJ could attach liability to any incorrect and fraudulent data.