The U.S. Securities and Exchange Commission last month charged Vale S.A., a publicly traded Brazilian mining company and one of the world’s largest iron ore producers, with making false and misleading claims about the safety of the Brumadinho dam including through its environmental, social, and governance (ESG) disclosures.

According to the SEC’s complaint, for years, Vale knew that the Brumadinho dam, which was built to contain potentially toxic byproducts from mining operations, did not meet internationally recognized standards for dam safety. However, Vale’s SEC periodic filings, sustainability reports, ESG webinars, presentations, and other public statements fraudulently declared its “commitment to sustainability” and achieving “zero harm” to employees and surrounding communities and assured investors that the company adhered to the “strictest international practices” in evaluating dam safety and that 100 percent of its dams were certified to be in stable condition.

“Many investors rely on ESG disclosures like those contained in Vale’s annual Sustainability Reports and other public filings to make informed investment decisions,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “By allegedly manipulating those disclosures, Vale compounded the social and environmental harm caused by the Brumadinho dam’s tragic collapse and undermined investors’ ability to evaluate the risks posed by Vale’s securities.”

Drawing attention to the fact that the SEC is the tip of the spear for the Administration’s much ballyhooed ESG initiatives, the “filing shows that we will aggressively protect our markets from wrongdoers, no matter where they are in the world,” said Melissa Hodgman, Associate Director of the Commission’s Division of Enforcement. “While allegedly concealing the environmental and economic risks posed by its dam, Vale misled investors and raised more than $1 billion in our debt markets while its securities actively traded on the NYSE.”

The SEC’s complaint, filed in U.S. District Court for the Eastern District of New York, charges Vale with violating antifraud and reporting provisions of the federal securities laws and seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

Make no mistake, the allegations are shocking, including a dam collapse that killed 270 people, caused immeasurable environmental and social harm, and led to a loss of more than $4 billion in Vale’s market capitalization, but also telling is that the SEC charged a foreign public company with what the Commission expressly characterized as an ESG disclosure violation (.. it certainly could have charged the securities laws violations without expressly terming this a failure of ESG), and in fact its first alleged ESG focused case demonstrates the import of ESG matters to the SEC.

It should be considered significant that this action was the first brought by the SEC Climate and ESG Task Force that operates in the Division of Enforcement with a mandate to identify material gaps or misstatements in ESG disclosures, like the false and misleading claims made in this instance by Vale. More information about the Task Force can be found here.

We advise when making government filings as well as public statements involving matters of ESG, companies need to strike a balance of mitigating enforcement related risk while making satisfying disclosures in this emergent and fast growing space where the rules are just now being written leaving many businesses to build the plane while flying.

We recommend best practices to our clients cognizant that this SEC enforcement action can only be seen as a harbinger of things to come.

ESG has become such a large component of my law practice that I am now collaborating with a fabulous group of attorneys in ESG Legal Solutions, LLC, a new law consulting firm. Nancy Hudes and I are now publishing a new blog at (.. yes, this blog will continue). This post originally appeared in that blog. If we can assist you or someone you work with in ESG strategy and solutions, from policy to project implementation, do not hesitate to reach out to me.