November 2023 has seen significant developments in energy and sustainability litigation, primarily in response to federal regulatory amendments. The main regulation that made headlines was the “Names Rule” amendment by the Securities and Exchange Commission (SEC).
On September 20, 2023, the SEC approved changes to the “Names Rule”. Initially proposed in May 2022, this rule obliges investment funds to “adopt a policy to invest at least 80 percent of their assets in accordance with the investment focus the fund’s name suggests”. The rule aims to combat the phenomenon of greenwashing – where investment funds purportedly exaggerate their environmental friendliness or sustainability efforts in their activities.
This regulatory shift has significant implications for corporate legal professionals. Notably, it presents a new responsibility for law firms and legal counsel within corporations, particularly those with sizeable investment portfolios. They now need to verify their portfolios’ compliance with this amendment, ensuring their investment funds align with the fund’s stated investment target.
In addition, the “Names Rule” amendment heralds a newfound regulatory focus on the accuracy of environmental claims made by corporations. This means additional due diligence to prevent greenwashing by assuring the veracity of their environmental claims. This regulation underlines the ever-increasing relevance of corporate environmental responsibility in today’s investment landscape.
The month of November 2023 serves as a stark reminder that sustainability isn’t merely a trend; it has become a regulatory matter. As federal bodies grow more stringent in their oversight of environmental claims, corporations must adapt to minimize legal risks, necessitating proactive lawyering and shrewd regulatory navigation.