Monthly Archives: December 2021

The recent IPO for Rivian Automotive Inc., the electric pick-up truck manufacturer whose shares increased 29% on the day following the offering, resulting in an enterprise valuation of more than $86 billion [1] – more than the market values of every other automaker except Tesla, Toyota, and Volkswagen—is evidence that investors may place a significant premium on certain companies that are at the forefront of addressing (and potentially seizing opportunities resulting from) climate change and related sustainability issues. The fact that Rivian has only produced 156 vehicles to date and has never demonstrated the ability to mass produce electric vehicles apparently did not faze investors. [2]

The Rivian IPO and investor enthusiasm generally for companies perceived to be at the forefront of the “green” economy provide strong incentives for companies to promote their sustainability bona fides. But along with marketplace rewards there has been increasing investor and regulatory scrutiny of whether ostensibly (or self-proclaimed) “sustainable” companies merit the designation.

As we have recently discussed, [3] there is significant momentum in the U.S. and abroad for companies to provide sustainability disclosure that is reliable, consistent, and comparable. Certain members of the Securities and Exchange Commission (“SEC” or “Commission”) repeatedly have signaled the importance of clear, consistent, and accurate disclosure when it comes to climate-related impacts. [4] Although the SEC has not updated its corporate disclosure guidance in more than a decade, it has solicited comments regarding the possibility of a mandatory climate-related disclosure regime and we expect the Commission to pursue such an approach in the near term. [5] In the meantime, the existing, well-established materiality standard applies, whereby information is material and must be disclosed if there is “a substantial likelihood” that a reasonable investor would view a particular fact as “significantly alter[ing] the ‘total mix’ of information made available.” [6] But, as Commissioner Herren Lee and others have observed, application of that standard in the ESG context has resulted in significant variability in terms of the quality and quantity of disclosure provided by issuers, yielding investor complaints, regulatory scrutiny and issuer confusion.

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