Florida attorney general issues subpoenas to CDP and SBTi

Florida’s Attorney General, James Uthmeier, has recently taken the Science Based Targets initiative (SBTi) and the Carbon Disclosure Project (CDP) to task by issuing subpoenas as part of an investigation into what his office calls a potential “climate cartel.” The investigation aims to uncover whether the nonprofits provided misleading information about the objectivity of Environmental, Social, and Governance (ESG) data to investors and engaged in deceptive trade practices, including offering services to improve ESG scores.

The subpoenas were announced on July 28, shedding light on the scrutiny surrounding CDP’s Reporter Services program, allowing companies to pay for feedback on their disclosures, potentially influencing their current and future scores. The Attorney General has accused both SBTi and CDP of selling services for better scores and public endorsements while creating incentives for corporations to pay for favorable treatment. Uthmeier’s allegations suggest that SBTi sells companies validation of their climate goals and directs them back to CDP for progress reporting, raising concerns about profit-driven feedback loops.

The investigation has expanded its focus to include potential antitrust violations, examining whether coordination between CDP, financial institutions, and investment services borders on market manipulation. Strikingly, Uthmeier’s decision to publicize the investigation sets it apart from previous cases, attracting attention to the wide net it casts to gather information, potentially leading to the targeting of more companies, particularly financial institutions. Legal experts like Roy Prather from Beveridge & Diamond view this as a targeted effort to gather information and identify additional targets beyond SBTi and CDP.

Despite the subpoenas, the SBTi and CDP declined to comment on the matter, potentially signaling the gravity of the investigation and the cautious approach taken by the nonprofits involved. The allegations of selling services to improve ESG scores and promoting a profit-driven feedback loop raise concerns about the integrity and objectivity of ESG data being shared with investors and the general public.

The findings of the investigation could have far-reaching implications for the financial sector, with at least a dozen other states already taking legal action against investment firms for anti-competitive behavior related to ESG investing practices. Uthmeier’s unique approach to publicly announcing the investigation underscores the severity of the allegations and the urgency to address potential market manipulation within the ESG space. As the investigation unfolds and more information comes to light, the true extent of the alleged “climate cartel” and its impact on the broader landscape of ESG investing practices will be revealed.