Climate whistleblowers are being prioritized in the Biden administration. Climate-related disclosures are currently covered under federal law, and whistleblowers around the world can help U.S. law enforcement detect and prosecute climate-related fraud and corruption. Notably, the U.S. Securities and Exchange Commission recently emphasized that it will rely on whistleblowers to identify material gaps and misstatements in climate-related disclosures.
Several U.S. laws have strong whistleblower provisions that provide protection against retaliation, including the ability to report confidentially or even anonymously. Many of these laws also have financial reward provisions for whistleblowers whose original information leads to a successful enforcement action. Climate whistleblowers can use these laws to report a range of legal violations that enable the climate crisis.
Here are ten things to look for:
1. Bribery in the fossil fuel industry – Whistleblowers around the world can use the Foreign Corrupt Practices Act (FCPA) to report corruption, while protecting their identity and qualifying for a financial reward. In addition to reporting bribes, whistleblowers can report violations of the FCPA’s requirement that companies keep proper books and records, including the use of falsified documents to conceal bribes or accounting schemes designed to hide improper payments.
2. Illegal lumber & timber imports and customs violations – The federal False Claims Act allows whistleblowers to report “reverse false claims,” in which the government has been prevented from collecting what it is owed. In the timber trade, this could include false claims on U.S. customs forms that undervalue or misclassify timber or timber products.
3. Violations of lease requirements in mineral extraction on federal land and offshore drilling – The False Claims Act prohibits fraud in connection with applications for permission to drill and related lease applications. Oil and gas whistleblowers have successfully used the qui tam provision of the False Claims Act to help the federal and state governments recover billions from oil companies for underpaying royalties, earnings tens of millions in rewards for their efforts.
4. Leaks of oil or natural gas related to federal leases for mineral extraction –To report concealed spills or false claims about natural gas flaring, whistleblowers can use the False Claims Act. Whistleblowers with knowledge of oil spills from mobile drilling rigs may also be able to report through another strong whistleblower law, the Act to Prevent Pollution from Ships.
5. Violations of swaps of commodity futures trading – Whistleblowers around the world can use the CFTC Whistleblower Program to confidentially report manipulative and deceptive schemes in connection with commodities, futures or swaps, including attempts to manipulate oil and gas prices.
6. False or misleading disclosures about climate-related risks – Whistleblowers can use the SEC whistleblower program to confidentially report publicly listed companies who mislead investors by failing to disclose material climate risks. These could include physical risks, such as flood or hurricane risks that threaten physical assets or asset-backed securities, or transition risks, such as risks posed by new environmental regulations or falling demand for fossil fuels.
7. Climate-related accounting fraud – In addition to misleading disclosures, the failure to consider climate risks could enable accounting fraud. Whistleblowers can also report companies whose public sustainability claims are contradicted by their internal accounting assumptions, such as companies who fail to integrate “net-zero” goals into their estimates of the useful lives of their carbon-intensive assets.
8. Misleading marketing of ESG products and services – Growing demand for sustainable investing and finance has been met with the rapid proliferation of products and services marketed towards environmental, social, and governance (ESG) goals. However, a lack of standards, data and expertise could make the industry ripe for manipulation. Whistleblowers with evidence of these or other potential securities violations can report to the SEC Whistleblower Program, while protecting their identity and qualifying for a financial reward.
9. Inflated oil and gas reserves – The SEC requires publicly listed fossil fuel companies to disclose estimates of reserves as supplemental information in their financial statements, but the process of reserve estimation is highly vulnerable to manipulation. Whistleblowers can use the SEC Whistleblower Program to confidentially report companies who engage in reserve manipulation schemes.
10. Money laundering – Whistleblowers around the world with evidence of money laundering can use the U.S. IRS whistleblower program or the Anti-Money Laundering Act to report money laundering and illicit financial flows, while protecting their identities and qualifying for a financial reward.
Do you have information of a climate risk disclosure violation?
