US: Mining Company Settles SEC Charges Related to Misleading Disclosures in Sustainability Reports Prior to Dam Collapse

On March 28, 2023, the U.S. Securities and Exchange Commission (“SEC”) announced a settlement with a publicly traded Brazilian mining company, one of the largest iron ore producers in the world, in which the company agreed to pay $55.9 million to resolve charges stemming from the company’s allegedly false and misleading disclosures about the safety of one of its dams prior to the January 2019 collapse of the dam. 

The SEC filed its complaint in April 2022, alleging that the company’s public sustainability reports and other public filings fraudulently assured investors that all of its dams were certified as stable, despite knowing that the dam that eventually collapsed did not meet internationally-recognized standards for dam safety.

The proposed settlement has been presented to the Court for approval. The company noted in a press release that the SEC has agreed as part of the proposed settlement that it would not oppose its motion to dismiss claims that it "acted with fraudulent or reckless intent" regarding its mine safety disclosures.

The SEC's case reflects an aggressive approach to litigating high-profile matters, and was spearheaded by the SEC's Climate and ESG task force, the SEC unit focused on identifying potential misconduct involving climate and ESG-related disclosure and investment. 

The SEC’s Division of Enforcement stated the action against the company “illustrates the interplay between the company’s sustainability reports and its obligations under the federal securities laws” and “demonstrate[s] that public companies can and should be held accountable for material misrepresentations in their ESG-related disclosures, just as they would for any other material misrepresentations".