An Approach for Investors, Companies
Author
Margaret E. Peloso - Vinson & Elkins
Vinson & Elkins
Current Issue
November-December 2020
Issue
6
Parent Article
The Uncertainty Principles

For whom is climate disclosure intended? This simple, unanswered question is central to evaluating the role of the SEC in further regulating climate disclosures. Some investors are calling for standardization of disclosures so they can compare risk across companies. However, a countervailing view is that climate disclosures are intended as risk assessment tools for the companies — a goal that could be undercut by regulatory requirements to use standard procedures.

With the publication of the final report of the Task Force on Climate-Related Financial Disclosure in 2017, many investor efforts came in the form of shareholder resolutions or letters asking companies to engage in scenario analysis to examine the impacts of steep emissions cuts required to achieve the goals of the Paris Agreement.

While TCFD aims to facilitate enhanced capital allocation by providing information to allow for pricing climate risk, its framework does not specify methodologies for the scenario analysis. The result has been that there is wide variation both in the actual assumptions that companies are making in projecting climate futures and the information they are disclosing. This has led to a patchwork of disclosures that are difficult for investors to compare.

As the SEC’s Asset Management Advisory Committee’s ESG Subcommittee recently noted, drawing a connection between corporate financial performance and environmental-social-governance policies (including climate) requires more robust frameworks, including the use of benchmarks and independent validation of ESG performance. Therefore, to the extent that the goal of climate reporting is to facilitate market transparency, the SEC’s role in developing a more consistent, robust disclosure framework for climate risk is essential.

However, an alternative view is that climate scenario analysis should be a tool to enhance corporate resilience. Many companies engaging in TCFD-style analyses benefit from evaluating their governance, internal organization, and business opportunities that emerge from the energy transition. From this perspective, the climate scenario analysis should be a tool for imagination. If the enhancement of organizational resilience is the goal, then companies should be encouraged to evaluate a variety of orderly and disorderly energy transition scenarios to plan for the climate future and disclose results as appropriate. A prescriptive regulatory approach to climate risk analysis and disclosure has the potential to stifle this kind of creativity.

Consider the following example. With the encouragement of investors seeking standardization, oil and gas companies have mostly adopted the practice of basing their scenario analyses on the International Energy Agency’s demand projections, which assume an orderly energy transition with robust natural gas demand through 2040. However, reliance on IEA scenarios neither provided companies with tools to evaluate short-term market shocks nor the potential for a sudden, lasting change in demand. There is nothing in the IEA scenarios that allows companies to test for the impact of the sudden drop in demand caused by COVID-19 and the collapse of OPEC+.

Given this, are energy companies better off with standardized scenario analysis that provides investors with clearly comparable information premised on an orderly energy transition? Or should we encourage the imagination that comes with the development of a range of short- and long-term scenarios to enhance corporate resilience and preserve long-term value?

No matter where you come out on these questions, there is value in enhanced transparency around climate disclosures. As such, the SEC could play a role in mandating a standardized method for disclosing the types of climate risk evaluations companies are undertaking, the assumptions underlying them, and what actions are being taken to mitigate any identified risks. This type of a framework could both encourage continued corporate imagination to build resilience and provide investors with enough information to compare the climate risk profiles of companies.

We Need a Federal Climate Risk System
Author
Mindy Lubber - Ceres
Ceres
Current Issue
November-December 2020
Issue
6
Parent Article
The Uncertainty Principles

The systemic risks posed by climate change are not partisan, or even political. They are financial. They are real, material, systemic risks for Wall Street, Main Street, and everywhere in between. Integrating climate risks into our federal financial system is about ensuring the stability and security of our economy.

Financial markets have a critical role to play in addressing climate change. Financial regulators like the Federal Reserve and the Securities and Exchange Commission must heed the calls of capital market leaders. They must listen to the scientists, listen to the economists, and listen to the financial experts sounding the alarm bells.

In early September, for the first time ever, an expert subcommittee of a federal financial regulatory agency issued a major report on climate risk, recommending that the Commodity Futures Trading Commission, the Fed, the SEC and other financial regulators act swiftly to address climate change as a systemic financial risk.

The report, “Managing Climate Risk in the U.S. Financial System,” was produced by the Climate-Related Market Risk Subcommittee of the CFTC, on which I serve. It issues recommendations for action, including putting a price on carbon, strengthening climate risk disclosure, and conducting stress tests to see how financial institutions like banks might fare in a carbon-constrained, rapidly warming world.

And it doesn’t stand alone. A movement is building — with more and more capital market leaders calling for action from our financial regulators by the day. It’s time our financial regulatory agencies listen to this increasing number of calls for action, learn from them and then act.

In June, the Ceres Accelerator for Sustainable Capital Markets issued its own report outlining the systemic threat climate change poses to capital markets, along with more than 50 recommendations financial regulators should take to combat this threat.

In July, investors with a collective $1 trillion in assets under management joined with former members of Congress from both major political parties to demand that financial regulators heed the report’s recommendations and address climate change as a systemic financial risk.

“The adverse impacts of climate change are already stressing key sectors of our economy,” David Jenkins, president of Conservatives for Responsible Stewardship, said in an endorsement of the June report. “The risks are real,” former Representative Carlos Curbelo (R-FL) told the New York Times. “We need leadership from every U.S. financial regulator to transition to a resilient, sustainable, low-carbon economy and avoid a climate-fueled financial collapse,” California Comptroller Betty Yee wrote in Barron’s.

In August, Senator Elizabeth Warren (D-MA) sent a letter to SEC Chairman Jay Clayton, urging him to act on climate change as a systemic risk and to require that publicly traded companies provide climate risk disclosure, among other recommendations.

Her colleagues in the Senate issued a major climate report, with significant emphasis on the role financial regulators must play in avoiding severe climate risks to the U.S. economy. They, too, called for mandatory climate risk disclosure, stress tests for banks, and cooperation from U.S. financial regulators with their global counterparts who are already engaging on climate.

We’re nearing an inflection point. The CFTC subcommittee, made up of experts representing financial institutions, banks, insurance companies, data service providers, and environmental and sustainability organizations, issued a clarion call in September to financial regulators based on the real-world impacts and risks of climate change.

That this recommendation for financial regulatory action has come from across the spectrum is a testament to the leadership of CFTC Commissioner Rostin Behnam, sponsor of the subcommittee, and Chair Bob Litterman. But it also shows just how extensive and serious a financial issue climate change is to our economy and our society — and that we urgently need action from our financial regulators.

Citizen Science and Agency Activities
Author
Kasantha Moodley - Environmental Law Institute
Environmental Law Institute
Current Issue
November-December 2020
Issue
6
Kasantha Moodley

Smell something toxic in the air or see a harmful cyanobacteria bloom? Now you can pull out your smartphone, download an app, and share your observations. Advancements in technology and the growing technical confidence of the public have upped the game of citizen science, expanding its long-standing role in water monitoring to other environmental concerns. New strategies such as crowdsourcing pollution events and establishing community-level sensor networks offer a plethora of opportunities to obtain real-time information on environmental conditions at varied scales.

This has great significance for the work carried out by environmental agencies. At a minimum, citizen science can be a valuable tool for programs that are limited in their capacity to obtain the data needed to inform environmental decisions (such as statewide water monitoring programs).

As we scratch the surface, citizen science and its applications have deeper implications for the respective roles of agencies and the public, particularly in the case of gathering data to highlight the environmental burdens of communities. We might think back to the Tonawanda Coke Plant in western New York, where community-generated data helped the state agency identify and shut down a major polluter. Community science has the potential to transform conventional forms of environmental governance. This undoubtedly places environmental agencies in a new role — one that requires balancing the agency’s key priorities with the expectations of an environmentally adept public.

As environmental agencies wrestle with these new roles and expectations, the Environmental Protection Agency is assessing how best to support the use of citizen science in environmental decisionmaking. EPA’s Office of Research and Development commissioned ELI’s Innovation Lab to identify and describe current and new uses of citizen science at state, tribal, and local environmental agencies. At the outset, it became abundantly clear that there was great diversity in the application, data use, and agency role and engagement strategy of citizen science programs.

The research team cast a wide net for model programs representing the variety of efforts across the United States. Fifteen models were identified across a spectrum of environmental applications. The most well known use of citizen science has been among state water monitoring programs. It is estimated that at least half of the states rely on volunteer monitoring, and in some of these states, citizen scientists generate over 20 percent of the data in the official integrated reports on water quality. Other emerging citizen science efforts in water programs include training volunteers to undertake wetland health evaluations and crowdsourcing observations of harmful cyanobacteria blooms and fish kills.

Air programs revealed many community science efforts that leverage low-cost sensor technologies, as communities work to understand hyper-local air quality trends and identify pollution hotspots. In these cases, community residents often take the initiative.

In California, residents of Imperial County worked with technical experts to establish an air-monitoring network that became a model for state legislation, AB 617. Under that law, residents of West Oakland who had been monitoring air quality for many years co-led the development of a comprehensive community action plan.

In Mecklenburg County, North Carolina, and Puget Sound, Washington, local agencies are using physical sensor testing stations and digital platforms to help members of the public understand how data from their own personal devices compare to data generated by regulatory monitors.

Other programs such as Smell Pittsburgh and the Idling Enforcement Program in New York City and Washington, D.C., have developed digital apps that allow air quality observations or noncompliances to be reported directly to local authorities for investigation or follow-up action.

These recent and innovative developments still face barriers — most notably, data quality concerns and underfunding. In water programs, some agencies require the use of strict data-gathering protocols to ensure that data are usable. For instance, Virginia has established a tiered set of data quality standards, ranging from highly stringent requirements for data to be used in formal reporting under the Clean Water Act, to more flexible standards for data to be used as a general guide for prioritizing the agency’s own monitoring, or to be used in general public education.

Air programs still wrestle with how to use data from low-cost devices that are not as precise as data gathered by monitors approved for regulatory use. An added complication is that agencies often do not have the budget to operate citizen science programs, which are often undertaken as activities tangential to core program work.

The ultimate goal is for citizen science to form the core of agency programs, creating shared value for the public and for the work of agencies. To meet this goal, programs need to generate data fit for purpose, build collaborative networks, and secure long-term institutional commitment.

In the short to medium term, it is anticipated that the experiences of these programs and other models will inch us forward to further defining, assessing, and realizing the environmental governance opportunities of citizen science. In the long term, if we follow this promising trajectory, it is anticipated that these efforts will permanently reshape our system of environmental protection.

Citizen Science and Agency Activities.

Developing a Sustainability Law Course
Author
Scott Schang - Wake Forest University School of Law
Wake Forest University School of Law
Current Issue
November-December 2020
Issue
6
Developing a Sustainability Law Course

"We would like you to come to Wake Forest Law to start an environmental law clinic and to teach environmental and natural resources law. There’s also the option to teach Sustainability Law, SUS 704, to the master’s students.”

I was delighted to get the offer from Dean Suzanne Reynolds in 2019, but I was also a little flummoxed. After 30 years working in environmental law firms and NGOs, I certainly knew a lot about environmental law. But what in the hell is “sustainability law”? Theodore Roethke said a teacher is “one who carries on his education in public.” And so it was only by calling on my career experiences and teaching SUS 704 that I got some sense of what sustainability law is.

It was spring 2014 at the Washington Plaza Hotel, and I was watching a rapt CLE audience soak up a talk by John Cruden, the charismatic, long-time leader of the Department of Justice’s environment division. John seamlessly wove the substance and gloss of environmental law into a compelling story about how “people matter.”

He’s right. Law is made, implemented, followed, violated, enforced, and respected (or not) by people. Lawyers can’t serve clients if they do not understand the motivations and personalities of the people who affect their clients’ interests. Law also reflects a social contract around issues, and it reflects moral values and common commitments.

SUS 704 starts by asking students to explore law as a social construct and how it both molds and reflects society. How does law relate to social norms, morals, ethics, and religion? Students tend to see how people-centric both environmental law and sustainability are, and they grapple with ways in which laws reflect the priorities of those with power and fails to address the burdens on those without. People certainly matter, but do all people matter the same? Are they all asked to share the same pollution burden, and do they all have the same legal recourse if not?

It was 2008, when I was a vice president at ELI. We had been meeting with a pro bono marketing consultant all morning. Leslie Carothers, then president of ELI and my environmental law hero, had asked a colleague to help ELI managers figure out how to frame and communicate what the Institute does. We had been struggling to distill our lawyerly paragraphs of thoughts into sentences, but the consultant wanted just a few words. Frustrated, I finally blurted out “ELI makes law work for people, places, and the planet!” Elissa Parker, ELI VP and my other environmental law hero, said “Scott got it!” Being lawyers, we proceeded to dissect, reassemble, and torture the phrase for another hour before agreeing that was the ELI slogan.

But I didn’t get it. We as a group came up with it, and I only enunciated it. Americans focus on the person who wrote the sentence, equation, or theory instead of the group of peers and competitors who co-created the body of knowledge. Perhaps movements need to be personalized into individuals, as was done with giants like Dr. King and Charles Darwin, but doing so can hide the hundreds, thousands, or millions of people who co-led those discoveries and movements. Lost in popular history are the colleagues who walked with that person, nourished and challenged their thinking, and helped them be the person they became. These institutions can do so much more than any person alone and do so across lifetimes.

As a result, in SUS 704 students do lots of group work. Learning how to be part of a team and work with people from very different perspectives is key to being a successful professional. It is also how the next generation tends to work, so it is a natural fit. And thankfully, SUS 704 students come from disciplines ranging from law to business and science to divinity, bringing the robust set of skills needed to address sustainability issues.

When I graduated college in 1988, I had two job offers: be the assistant to Fred Krupp, head of Environmental Defense Fund in New York, or be an environmental paralegal at Cleary in D.C. My heart was with EDF, but my father, who was a trucking company executive, and I could not understand each other at all on environmental issues. Knowing I had no desire to work with companies, I thought I should go to Cleary to understand “how the other side thinks” before I started law school and my eventual career working for “the good guys.” Plus, I hated the idea of living in 1988 New York City. It turns out, I really liked working at Cleary, and stayed there for 10 years.

During my early career, the locus of environmental policy innovation shifted from law to economics. With the cap-and-trade system implemented in the 1990 Clean Air Act Amendments, economic-minded think tanks took the lead in policy discussions. Similarly, discussions about sustainability and the role of business in pursuing the triple bottom line were favored over regulatory and traditional enforcement approaches, which were cast as inefficient and signs of government overreach. Michael Vandenberg, who drew me from Cleary to Latham & Watkins as an associate and then promptly shuttled off to Vanderbilt to start his illustrious academic career, flagged this development, in part, as private environmental governance.

The lessons from private environmental governance to date seem fairly clear. Businesses can play a strong role in pursuing sustainability goals, but these tend to have modest overall impacts on pollution results. Companies are mission driven, and sustainability, while important, is not their mission (no matter what their ads say).

Thus, SUS 704 students learn how corporate supply chains work, how the environmental and social aspects of sectoral standards like the Roundtable on Sustainable Palm Oil work, and the positive and negative impacts of supply chains on communities in the global South. They also study what motivates and constrains the actions of business, no matter how socially minded.

It was 2018, and I had just finished reading The Color of Law by Richard Rothstein. The well-documented story of government redlining and segregationist housing policies running well into the 1970s left me stunned and asking one question: “Why wasn’t I taught this in law school?” I had paid for a legal education at a top-10 school and left ignorant of this aspect of segregation and oppression that our legal system was used to create and enforce.

During my career, Americans’ founding distrust of government was flamed from a smoldering concern to a firestorm of disdain. The conservative theory of limited government transmogrified into a garble of personal rights without common responsibilities, government run by billionaires, a postal service expected to turn profits, and a bankrupt fiscal policy based on the fantasy that tax cuts for the richest result in better outcomes for the poorest. The concerted defunding of government has resulted in the very outcome those who decry defunding the police fear: the inability of agencies to respond quickly and effectively, not out of lack of skill and dedication of public employees, but out of shear starvation and neglect.

Companies and businesspeople cannot do the job of government, which is to set and enforce norms in a transparent, participatory, and just manner. I have watched companies operate in remote lands where governments lack the capacity to deliver basic services, and businesses often nobly step up to fill the breach. But they should help build the capacity of government in these situations, not displace it. Smart companies know this, and increasingly they are looking at how to engage with government instead of replacing it. In the United States, we have not learned this lesson: let government govern, and let business trade.

Thus, SUS 704 students explore the relative roles, strengths, and weaknesses of business and government to achieve effective, transparent, and participatory solutions to sustainability problems. They investigate the importance of rule of law and explore using human rights to advance environmental and social goals. And they consider that from 1970 to 2018 ambient air pollution decreased by 74 percent while the economy grew 275 percent, all under the Clean Air Act’s command-and control approach.

It was June 1987 in Misty Fiords National Monument, southern Alaska. The shovel kept glancing off the wet tree roots and into the soggy soil. It was taking me forever to dig a trench as a volunteer on a Forest Service trail crew. The crew chief walked over to check on my progress, threw me an exasperated look, grabbed a mattock, and accomplished the job in a few swings. I did not know enough about the tools at my disposal and how to use them to do my task well.

Environmental law is often portrayed as an outdated tool. My first 26 years of law practice saw little legislative housekeeping to update and modernize existing laws, much less pass new ones. Congress largely stopped tending to those innovative laws it had created, even as society’s learning about their shortcomings, and new ideas about how to control pollution more efficiently and effectively, grew.

It would be a mistake, however, to assume environmental law and policy are outdated and irrelevant. One of the wonderous characteristics of environmental policy is that, like water, it finds a means to flow around obstacles put in its way. When legislation is blocked, administrative reform and renewal blossom. When administrations resist change, activists call on the courts. When courts throw up roadblocks, states and localities step up. And when government as a whole falters, companies step into the breach through private environmental governance. When a barrier to environmental progress arises, the ingenuity of environmental professionals should never be underestimated — provided they understand the incredibly diverse set of tools at their disposal to achieve their goals.

SUS 704 aims to familiarize students with these tools and how and when to use them. Students work through case studies and practical problems, role playing to represent parties whose views they do not share, and trying out the panoply of tools from litigation to legislation, activism to private governance, taxes to social norms. Students find they can advance sustainability not just through traditional law, but also through corporate policies, personal habits, and social activism.

Today, roughly seventy percent of people in the global South lack formal documentation of their land rights. Landesa, started by University of Washington law professor Roy Prosterman and his students, has spent 50 years working with governments to institute land reforms. I joined Landesa, where I still consult as senior director of corporate engagement, in 2017. I work directly with companies on ways to improve land rights of smallholder farmers and women in their supply chains in countries like Malawi, Mozambique, Tanzania, Brazil, and India.

I was attracted to Landesa in part because it has brought land rights to more than 180 million families, and its goal is not to sustain the status quo, but to transform it. Sustainability also holds transformational promise, but the current American context for sustainability is both problematic and pregnant with possibility. Environmental law remains largely a pollution control proposition, reflecting its 1970s roots and still bound in the same regulation-centric pot. While sustainability has gained in parlance, government has little statutory authority to undertake policymaking. And Americans have not undertaken the necessary dialogue to agree on the goals the law should follow.

What do garner attention, at the moment, are the economy and social justice. The environmental law revolution of the 1970s was deeply informed by the civil rights movement. This raises the possibility that another such moment of rapid legal innovation is possible as society grapples with institutionalized racism, the economic carnage of Covid-19, and the climate crisis. Sustainability’s lens calls for an integrated approach to these crises, as they are deeply interrelated in both cause and solution. I hope the tools and approaches that grew from environmental law will equip SUS 704 students to engage this moment and craft the next generation of law, a law embracing new approaches crafted with a view toward sustainability and transformation. TEF

Creating an advanced lesson plan necessitates more than listing required reading, but also a prior assay on how core tenets can play out in real-world contexts, requiring in turn understanding the roles of often adversarial social groupings.

The Uncertainty Principles
Author
Hannah Vizcarra - Harvard Law School
Harvard Law School
Current Issue
November-December 2020
Issue
6
The Uncertainty Principles

Climate change is impacting how we live our lives and how companies do business. When that happens, it impacts the law. A prime example is the resilience policymakers tout to combat the inevitable shifts ahead. But resilience in the face of change requires transparency — companies and financial entities need to account for these impacts openly and honestly. Investors’ interest in climate-related risks and opportunities has grown rapidly in the last five years, leading to better corporate disclosure practices. Yet despite pressure to act accordingly, U.S. regulatory bodies have not taken significant direct actions to address climate change risks. Reticence to do so may ultimately give them less input into how legal standards evolve. Standards grounded in malleable concepts that can improve as the nature of investing changes, such as the materiality standard grounded in the needs of the “reasonable investor,” can shift expectations even absent regulatory action.

Our regulatory bodies appear to be of two minds about directly addressing climate change risks. The Securities and Exchange Commission has resisted calls to incorporate explicit disclosure obligations into its regulatory structure, and the Department of Labor’s Employee Benefits Security Administration (EBSA) has proposed new regulations that indicate substantial skepticism about environmental, social, and governance factors’ connection to financial outcomes in investing. In contrast, the Commodities Future Trading Commission (CFTC) and Federal Reserve are actively exploring climate-related impacts on the financial system.

Existing regulatory guidance from the SEC does not fully address the rapidly changing climate discussion, its importance to investors, and the certainty of climate-related impacts. The SEC released guidance on the materiality of climate-related information in 2010, after investors, environmental groups, and the New York attorney general petitioned the commission. The release also followed a series of investigations into power company disclosures by the New York AG, leading to settlements that required disclosure of certain climate-related information in companies’ SEC filings. But the 2010 guidance largely sidestepped the question of how companies should handle climate-related information in materiality analyses. The commission listed examples of such information that could be material but did not fully explain what it expected of corporate management. It emphasized that firms should limit disclosure to financially material information, but not limit the information considered in making that determination. The SEC also failed to follow the guidance with substantive enforcement efforts. Reviews of corporate disclosures in the following years reveal little significant change. An effort to go behind the disclosures and evaluate how companies made their materiality determinations could have more precisely defined when climate-related information is material and encouraged more substantive corporate evaluations.

Despite opening a door to new guidance or regulation on climate-related and ESG issues in a 2016 concept release, the SEC has remained on the sidelines, leaving companies and investors to spar over how expansive climate-related disclosures should be, and on what topics and in what form. Last May, the commission’s Investor Advisory Committee recommended the SEC update reporting requirements to include “material, decision-useful ESG factors” and specifically referenced climate-related information.

In early 2020, State Street Global Advisors, BlackRock, and other investment firms announced new plans for persuading companies to address financially material ESG issues. The high-profile announcements followed moves in recent years by Wellington Management, CalPERS, and other institutional investors to integrate climate-related data into their processes and increase the pressure on companies to more deeply consider climate change risks and disclose how they are accounting for those risks in their operations. Companies have responded with a steady stream of climate-related goals, commitments to disclose in line with the international Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) recommendations, and climate reports in addition to sustainability reports and other annual reports.

Adding to pressure from advocates and investors, academics have proposed various approaches to revising SEC disclosure requirements to expand discussion of sustainability issues, including climate. In 2016, Robert Eccles and Timothy Youmans suggested in the Journal of Applied Corporate Finance requiring a statement of significant audiences and materiality to better define what ESG issues boards consider material and the specific stakeholders to which they relate. Last year, Jill Fisch proposed in the Georgetown Law Journal creating a new sustainability, disclosure, and analysis section of SEC filings, modeled after the management discussion and analysis section. Her idea was that companies could then identify and explain their choice of the three sustainability issues most significant to their operations. Also last year, Dan Esty and Quentin Karpilow suggested a three-tiered mandatory ESG reporting regime in the Yale Journal on Regulation. These proposals would likely require additional SEC guidance on their applicability to climate-related topics.

Unfortunately, recent statements by SEC commissioners have pushed back on calls for new guidance or requirements, focusing on the “amorphous nature” of ESG. Relying on the old mantra that U.S. disclosure requirements are principle based, their view is that ESG or climate change-specific disclosure requirements are unnecessary because companies already disclose material information once it becomes material, whether it is climate-related or not. However, this largely misses the point that companies need help determining how to properly disclose risks that are rapidly becoming financially material but are distinct from the types of information they have typically worked into their analyses. By failing to provide additional guidance, the SEC leaves corporate managers with a murky view of how they should consider climate-related information and without enlightenment as to how best to navigate differing opinions from investors and advocacy organizations.

The Trump administration is unlikely to support efforts to more specifically address climate change risks in disclosures. President Trump issued a directive to the Department of Labor in 2019 to review data on Employee Retirement Income Security Act (ERISA) plans, identify trends in investments in the energy sector, and review guidance on fiduciary responsibilities for proxy voting. Last June, EBSA released proposed amendments to the investment duties regulation under ERISA. The proposal discourages considering ESG factors in ERISA-covered plans, emphasizing financial outcomes above all else, and restricts the ability of fiduciaries to offer ESG-themed funds as default options. It also departs from previous guidance by requiring potentially burdensome documentation of equal economic returns and risks for investment choices partially based on an ESG factor.

The justification requirements and other aspects of the proposal may dampen recent enthusiasm for ESG-focused investments. It may discourage integration of the many topics, such as climate change, that live under ESG as factors in investment decisions but does not preclude such integration. The proposal explicitly recognizes the potential financial materiality of ESG factors. EBSA’s skepticism that such investments can have equal or better financial outcomes and focus on documentation heightens the importance of disclosure that better details financial aspects of climate-related risks and opportunities.

Concern over climate change risk goes beyond investors and firm-level corporate disclosure. Banks are revising lending policies to limit lending in certain extractive industries. They are also increasingly disclosing their own exposures to climate-related risks, with reports guided by TCFD on climate-related risks in their assets and estimates of the environmental and climate impacts of their lending practices.

Financial and bank regulators, with substantial independence from the White House, are considering whether climate change poses systemic risks to the financial system. While U.S. regulators are generally behind their European counterparts in grappling with how to address climate risks in their supervisory and regulatory capacities, they are not ignoring the issue. The CFTC’s Market Risk Advisory Committee commissioned a report on climate-related systemic risk expected this fall. Federal Reserve Chair Jerome Powell said in January that the Fed has a role to play “to ensure that the financial system is resilient and robust against the risks of climate change” and is working to understand how to do so. Powell has also indicated a willingness to join the Network of Central Banks and Supervisors for Greening the Financial System and has sent representatives to participate in its meetings. The Federal Reserve Bank of San Francisco hosted a conference on climate change in 2019, commissioning a series of papers. The executive vice president of the Federal Reserve Bank of New York, Kevin Stiroh, delivered remarks on climate change and risk management in bank supervision at an event at Harvard Business School earlier this year. Stiroh is serving as the co-chair of the Basel Committee on Banking Supervision’s high-level Task Force on Climate-Related Financial Risks and has said that the Federal Reserve is devoting “a lot of resources” to climate change risk research. The Fed is closely following central banks and regulators in other countries who are developing stress testing and additional disclosure requirements.

Even absent new regulation, legal standards for corporate disclosure and risk management will change. The rise in firms looking to partner with climate data providers marks a shift from talking about climate change as something that will eventually impact financial markets and corporate well-being to considering how and when that will happen. The flurry of investor commitments on portfolio management and voting practices indicates a key component of materiality — who is a reasonable investor — is evolving as it relates to climate-related information.

Securities law requires companies to disclose certain information to investors, and imposes liability for untrue or misleading statements and omitting financially material information. Management and boards decide what to disclose, but they must consider the shareholder’s viewpoint. The reasonable investors’ evolving view of climate-related information means companies can no longer make materiality determinations as they always have. As investors take concrete actions to incorporate climate-related information into their analyses and make specific decisions dependent on that information, it becomes material for the purposes of disclosure. Investors’ recent moves increase the pressure on companies to more deeply consider climate change risks to their operations and how they disclose them.

Corporate actors have already begun to shift their approach to managing and disclosing climate change risks and opportunities — increasingly recognizing the climate-related impacts on their business. Non-governmental organizations have stepped into the void to referee this process. The Financial Stability Board’s Task Force on Climate-Related Financial Disclosures galvanized these efforts and brought together a broad coalition of companies and investors to agree on a general framework for climate-related disclosures — heavily influencing the conversation, providing heft to the effort, and solidifying buy-in from industry players. Other organizations such as Ceres have long made enhanced disclosure a priority, providing guidance on specific metrics and working directly with companies on improving disclosures. The Sustainability Accounting Standards Board (SASB) has developed industry-specific guidance on when ESG issues, including climate-related topics, may become material under U.S. securities law. Industry standards organizations are also entering this space. Earlier this year, the American Petroleum Institute and International Association of Oil & Gas Producers collaborated with the International Petroleum Industry Environmental Conservation Association to release updated sustainability reporting guidance for the oil and gas industry that specifically addresses climate change risks and opportunities.

As investors gain a more sophisticated understanding of climate change information and comfort using it to inform their decisions, courts are more likely to consider climate-related information material. When, how, and whether certain topics become material depend on case specifics. A court considers the totality of the information the investor considers and how the information at issue in the case fits within that context. There is no bright-line rule on when something is material, and courts are understandably wary of setting the threshold too low. The reasonable investor standard is ostensibly objective, measured by the views of the mainstream market as a whole in which the reasonable investor is neither the worst nor best informed. A reasonable investor must exercise care in considering information, takes into account publicly available information and relevant industry customs, but is not necessarily an expert. Despite prominence in the definition of materiality, investors are not directly involved in disclosure decisions, making court review all the more important.

The positions of the Big Three investment firms (BlackRock, State Street, and Vanguard) play an outsized role in influencing corporate actions. All three have made waves on the topic of climate-related information. They are taking a more proactive approach to engaging with corporate management on climate-related issues and showing a willingness to vote against the company on shareholder proposals. They may also play an outsized role in influencing the direction of legal interpretation. They have significant market pull that can help define an industry standard for reporting frameworks. By naming SASB and TCFD as their preferred guidelines they shape corporate decisions about what reporting guidance to follow. Their policies and practices regarding climate-related information could become the reasonable investor’s position. While they may be the most influential, efforts to gather, consider, and incorporate climate-related information into portfolio management expands well beyond the Big Three.

In cases involving environmental information, materiality findings generally coincide with acute events, such as spills or accidents, or substantial noncompliance with environmental regulations. Very few cases have raised questions of materiality specific to climate change-related information. But as investors engage more with such information, more allegations of misleading disclosures are likely to make their way to the courts and require a determination of materiality. At a minimum, courts can no longer dismiss climate-related information as a niche interest of impact investors.

Two cases directly addressing climate disclosures have resulted in significant opinions, both involving the same basic facts. The first case to make it to the courtroom was a shareholder suit against ExxonMobil. The Ramirez v. ExxonMobil court partially granted a motion to dismiss that acknowledged the potential for information on climate risks to be material to reasonable investors, but it did not review the merits of the arguments in full. In New York v. ExxonMobil, the court considered the merits of the claim that the firm misled investors in disclosures about how future climate policies could impact product demand and how it incorporated this information into its project-level business planning.

Plaintiffs failed to convince the court of the materiality of the company’s statements and supposed omissions. The court found plaintiffs’ experts unpersuasive and found no evidence of impact on investors’ analyses or decisions during the relevant time frame. These cases acknowledged the potential materiality of climate-related information but did not ultimately find future cost estimates of an energy transition material to a reasonable investor’s decisions. The discussions of how to treat climate-related information in these cases may help shape corporate materiality determinations in the near future but do not provide a clear path for how the law will develop.

Although at first glance the New York opinion may seem to run counter to the argument that courts are increasingly likely to find climate-related information material for disclosure purposes, a closer reading results in a more nuanced assessment. The opinion shows companies have significant leeway in how they consider future transition risks as long as discussions of their evaluation and incorporation of those risks are not misleading. Of particular importance is how the judge discussed the way a reasonable investor would view cost assumptions that feed into modeling and projections for future costs and demand. The court’s declaration that “no reasonable investor” would make investment decisions in the near term based on “speculative assumptions of costs that may be incurred 20+ or 30+ years in the future with respect to unidentified future projects” may not hold in a different context.

The case focused on whether the company did one thing and said another within a narrow time frame, 2013-16. Investors are now actively evaluating firms’ views of potential future demand and costs and calling for more disclosure on how companies make these evaluations. Investors may not make decisions based on that type of a future-scenario projection alone, but they might make a decision based on how well the company is prepared to adjust to the possibility of that future and whether the business is making a good-faith effort to grapple with plausible scenarios.

The New York case should give solace to companies trying to assess future transition risks and provide shareholders with an understanding of their assessments without elevated liability risk. It should also encourage them to more fully explain their analyses. The case focused on differences between the company’s estimates of how future policy decisions might impact the cost of CO2 described in its public-facing “Outlook for Energy” report and nearer-term, project-level cost projections for internal budgeting and planning purposes found in its annual “Corporate Plan DataGuide.”

The data guide was used to prepare annual planning budgets at the business-unit level. It provided default assumptions of costs as a starting point. Planners were expected to adjust these default cost numbers based on more detailed, project-level information about expenses specific to their project’s locality and within relevant time frames. The guide did not represent all potential future costs of the full suite of climate-related policies available, and its information was not public nor intended for investors. The price assigned for the purpose of the outlook document served as a stand-in for the possible costs of a suite of potential future policies and fed into modeling used to consider future changes in product demand and supply and technology uptake. It did not represent a specific carbon price or project-level cost the company might expect to see directly applied to its operations and thus incorporated into its budget planning process (which is what the data guide’s internal numbers were designed to help project). To understand this difference and why it matters requires some understanding of climate economy models, scenarios, and analyses.

The New York case should show stakeholders the importance of understanding the tools industry uses to imagine and plan for the future. Investors are increasingly interested in how companies model future costs of climate policies, how climate change projections impact corporate project planning, and to what extent companies are prepared to adjust to the physical and transitional impacts of climate change — pressuring firms to disclose more about their scenario-analysis efforts. But they also need to better understand how these tools work — what they can do, and what they can’t. The New York outcome does not mean climate-related information is immaterial. The investor relationship to climate-related information has shifted since the period at issue in the case, changing even more rapidly in the last year, a trend likely to continue and one that could impact a court’s analysis.

Exxon faces another lawsuit based on the same facts, filed by Massachusetts Attorney General Maura Healey last year. That case includes claims of misleading investors familiar to followers of the New York litigation while also raising consumer protection claims. Other shareholder suits have also emerged. But more interesting will be future cases addressing the adequacy of climate disclosures that investors are just now beginning to incorporate into their decisionmaking. As investors find new ways to incorporate climate-related information into their portfolio management practices, evidence grows to support finding such information material.

The cases to date have dealt entirely with transition risk climate-related information, meaning information on risks associated with a change to a low-carbon economy. Corporate disclosures around the physical risks of climate change may cross the materiality threshold even sooner than modeling of future drops in demand or price shifts from an uncertain path to lower carbon emissions. As investors better understand the current and near-term physical impacts of our changing climate it may be even easier to show the financial importance of such information. Increased investor use of climate information increases the likelihood of future cases addressing different types of climate-related information in different time frames, contributing to evolving case law and increasing the likelihood of different outcomes.

While the energy sector gets much of the limelight when it comes to climate change impacts, other industries are recognizing physical and transition risks. Infrastructure development, real estate, and insurance sectors have had to adjust to very real climate-related impacts. Recent research calls into question the future of the conventional 30-year mortgage in some areas of the country. The FEMA flood maps that insurers, developers, and local governments rely on for planning purposes and pricing risk do not fully reflect expected climate risk, creating a demand for sea-level rise and flooding data with more up-to-date climate science and projections, and leading some jurisdictions and private sector entities to develop their own data.

The debate about whether ESG factors should be considered by investors and plan managers, corporate disclosure practices, and financial risk management is fast becoming obsolete for issues like climate change. As warming impacts businesses and their supply chains, and our communities and their governments are forced to more directly respond, the materiality of climate-related issues will only become more apparent for many sectors. As they do, the existing law will require changes to disclosure practices regardless of whether new regulatory requirements have been imposed.

These trends highlight the importance of companies clearly explaining how they evaluate and consider climate-related information. Right now they are left to do so without the benefit of regulatory guidance, making that task more challenging. Regulators and courts will ultimately have to grapple with the materiality question even if they are not interested in encouraging increased focus on climate change. TEF

The Securities and Exchange Commission is leaving corporate managers with a murky view of how they should consider climate-related information and without guidance on how best to navigate differing opinions from investors and advocacy organizations.

"The Ultimate Eco-Catastrophe"
Author
Stephen R. Dujack - Environmental Law Institute
Environmental Law Institute
Current Issue
November-December 2020
Issue
6

The biggest machine ever built is run by a consortium of European governments called CERN. Its Large Hadron Collider accelerates heavy subatomic particles at near light speed around a circle 17 miles in circumference before smashing them together. Scientists then study the remains and obtain important clues about how the universe works.

The LHC occupies a huge donut-shaped tunnel looping across the Swiss-French border near Geneva. It is a neighborhood that pairs our most advanced tech just below alpine pastureland seemingly out of the children’s book Heidi. The bucolic setting belies the fact that experiments at the LHC (and at smaller accelerators around the world built earlier) could conceivably trigger what Harvard physicist Sidney Coleman once called “the ultimate ecological catastrophe.”

The LHC was built with a singular purpose — finding the elusive final link in the Standard Model of Particle Physics. Predicted in the 1960s, the long-missing Higgs boson, working through the conjectured Higgs field, endows other particles like protons and neutrons with mass. Without the Higgs, there would be no stars, planets, or people.

The race to discover subatomic particles really kicked off after World War II. Around 1970, some physicists became alarmed that the energy of particle collisions might push the fragment of the vacuum pervading the universe that is within the machine itself from the current low-energy state to an even more stable one. This vacuum decay could then start a cascade of change destroying the whole of creation. A later worry was that creating a Higgs boson could similarly end the cosmos through a change in the universe’s Higgs field.

Well, nothing happened with any of the particles scientists began to discover using colliders, and the LHC found the Higgs in 2012, completing the set. So seemingly less problematic is the merely local catastrophe resulting from the formation of mini black holes that then swallow the Earth. A few weeks before the LHC was switched on, physicist Sean Carroll calculated the chances of creating such a black hole as about .00000000000000000000000001 percent. That is exceedingly small, but there was not a notice-and-comment period in which the public was informed of the risk as well as any rewards that might result from discovering the Higgs. Indeed, the same has been true of other potentially dangerous experiments performed earlier.

Naturally these risks have led not only to (failed) federal lawsuits to stop colliders but also to a chapter in a book by Richard Posner, the prolific former Seventh Circuit jurist. In Catastrophe: Risk and Response, he proposes a permanent special advisory body of experts to inform the public debate.

Instead of a public advisory body, there were decades of secret meetings, as revealed in Ian Sample’s award-winning 2013 book Massive: The Higgs Boson and the Greatest Hunt in Science. Physicists have in fact recognized the risks of colliders and carefully researched and assessed them — just as they had with conjectures the atmosphere could catch on fire as a result of the Manhattan Project’s atom bombs. When it comes to the experimental accelerators that popped up after the war, physicists ended such secret debates time and again by noting that heavy particles in cosmic rays collide with the airless Moon at energies far higher than any current machine can generate.

Which isn’t to say there has been no public discussion. The fear of a black hole being created by an atom smasher looking for the Higgs became a media frenzy in 1999 after Scientific American published letters expressing concern. The editors had called on physicist Frank Wilczek to write a reassuring adjoining note. He concluded that black holes were unlikely to persist beyond a few seconds — but what should really worry the public are strangelets that might be produced by an experiment. Strangelets are a theoretically more stable form of matter. Much like in vacuum decay, making them could lead all adjacent particles to become strangelets, on and on again, ending the universe as we know it. A similar eco-
catastrophe was later laid at the feet of conjectured magnetic monopoles.

One study that was discussed only in the literature put the upper limit of the risk of a universe-ending event at the Brookhaven accelerator near New York City at 1 in 50 million. That is within an order of magnitude of a Superfund site post-cleanup risk goal, but vastly more people are in danger. Sample notes that a 1 in 50 million chance of killing everybody on the planet works out to “the equivalent of expecting 134 people to die” as the result of a subatomic experiment, not to mention destabilizing the entire universe.

Sample is hopeful that nothing is likely to go wrong with today’s technology. But it makes sense to widen the circle of decisionmaking along the lines of Posner’s public panel of experts — and to make all meetings open. There is also a need for a body of law to govern potentially dangerous experiments. And as Posner notes, for lawyers to play a useful role here, they need to become more scientifically literate.

Meanwhile, colliders are getting more powerful every year.

Notice & Comment is the editor’s column and represents his views.

 

Sturgis Cycle Rally an Expensive Public Health Disaster

The Sturgis Motorcycle Rally led to significant spread of the novel coronavirus in the event’s home state of South Dakota and in other parts of the United States. . . .

San Diego State University’s Center for Health Economics & Policy Studies used anonymized cellphone location data and virus case counts to analyze the impact of the 460,000-person event . . . believed to be one of the largest events held during the pandemic.

The consequences were “substantial,” the researchers concluded. By analyzing the parts of the country that had the highest number of Sturgis attendees and changes in coronavirus trends after its conclusion, they estimated 266,796 cases could be linked to the rally. That’s about 19 percent of the number reported nationally between Aug. 2 and Sept. 2, and significantly higher than the number state health officials have linked through contact tracing. Based on a covid-19 case statistically costing about $46,000, the researchers said, that would mean the rally carried a public health price tag of $12.2 billion.–Washington Post

 


Scott Pruitt’s $43,000 phone call

E&E News is an invaluable source for developments in environmental protection, with a staff devoted to attending hearings and sifting through documents to pierce the veil around the actors involved in policymaking. So it was amusing to see a straight news item announcing that the web site had obtained a grudgingly issued photograph of then Administrator Scott Pruitt’s sound-proof phone booth installed at great expense in a storage room that is part of the agency chief’s office. The web site also revealed that Pruitt had only used the facility for one phone call, and as of 2018, his successor, Administrator Andrew Wheeler, had not used the booth at all. Which means that at least as of that date, Pruitt’s single secure phone call cost the taxpayers more than $43,000.

The photograph was obtained via a March 2017 Freedom of Information Act request that was at first denied on the grounds that revealing the nature of the booth would be potentially dangerous to some unnamed individuals — “an unwarranted invasion of personal privacy,” the agency said, which “could reasonably be expected to endanger the life or physical safety of an individual.” E&E noted dryly, “EPA press officials didn’t respond to questions for this story, including whose privacy or life was at risk from the disclosure of the photo of the phone booth.”

The decision was appealed, and eventually the agency relented and released a photo. After seeing the image, the reason for EPA’s hesitancy is clear: there is a toilet in the foreground, although apparently not part of the soundproof booth. Why the agency didn’t crop out the commode will remain a mystery, but it is comforting to note that in addition to making phone calls in privacy within his office suite, the administrator can take care of business.

The article reveals that Pruitt admitted that the booth didn’t meet the high standards of a SCIF, a Sensitive Compartmented Information Facility, such as is used for presidential and congressional communications that must be secure. Pruitt’s one phone call, however, did go to the White House, as revealed by a Sierra Club lawsuit.

The agency insisted that “telephone conversations inside the booth could not be audible outside the booth from any side.” Which raises the question, why can’t the administrator make a confidential phone call from his or her desk? If the calls are not sensitive enough to require a SCIF, why not just chase all subordinates out of the room and close the door?

Any competent carpenter could install a stout door for the administrator’s office, blocking anybody from overhearing conversations, for a few hundred dollars. And if you rarely need to use the booth, maybe instead take a cab to the White House and speak to your contact in person, at a cost far less than what Pruitt paid for his single call.

The booth exceeded the $5,000 ceiling for such renovations provided for by law, and the agency failed to notify Congress as required. A good part of the article details the legal wrangling that came from the disclosure of the booth in news reports. As of September, the agency still was in violation of the Anti-Deficiency Act by not reporting the cost overrun, according to E&E News.

"The Ultimate Eco-Catastrophe".

When Science Is Influenced by Politics, It's Not Good for Business
Author
Sally R.K. Fisk - Pfizer Inc.
Pfizer Inc.
Current Issue
November-December 2020
Issue
6
Sally R.K. Fisk

Protecting the environment and public health from the dangers of human activity requires a sound scientific basis for legislation, rulemaking, and developments in common law. Unfortunately, politics can prey on science. When that happens, the rule of law falters, and public trust wanes. Current events illustrate this breakdown. Here, the private sector has an important role, and perhaps obligation, in sustaining the integrity and rigor of the science that underpins our laws and corporate actions.

An example of this corporate role occurred in September, when nine drug companies, including my employer, Pfizer Inc., pledged to protect the time-tested scientific processes and regulatory protocols that have ensured the delivery of safe medicines and vaccines. The firms have been working faster than ever before to deliver a vaccine for COVID-19.

Simultaneously, public confidence in their ability to achieve safety and speed was eroded by reports of intense pressure on the Food and Drug Administration to approve certain therapeutic treatments for the virus without sound scientific evidence of their effectiveness and safety. The signatory CEOs committed to “continue to adhere to high scientific and ethical standards regarding the conduct of clinical trials and the rigor of manufacturing processes.” Implicitly, these companies will not tolerate political pressure on FDA to approve their vaccines unless the science supports approval. Ultimately, the goal of the pledge is to help ensure “public confidence in the rigorous scientific and regulatory process by which COVID-19 vaccines are evaluated and may ultimately be approved.”

This pledge is an example of the private sector acting to reassure the public of the need for rigor and scientific integrity for both the regulator and the regulated to meet important goals like protecting public health. While the criticality of science to ensure the safety and efficacy of a vaccine is central for most people, the criticality of science in public health protection through environmental regulation is less clear and therefore more vulnerable.

The regulated community and environmental regulators could face their own need to assure the public of the scientific integrity and rigor being applied to protect public health due to the Strengthening Transparency in Regulatory Science proposed rule, which would require raw data to be disclosed and for studies to be reproduceable. Critics say the proposed rule would enable EPA to weaken existing rules that are based on large-scale epidemiological studies and would stymie responses to significant environmental disasters, such as Deepwater Horizon, which are not reproduceable. The proposed rule has been challenged by the scientific community because, as reported by The Hill, peer review is “much more valuable than raw data that could contain personal and health information or confidential business data.”

For example, air pollution rules rely on large epidemiological data sets, in which individual participants are protected from disclosure by privacy rules or confidentiality agreements, to support limits on particulate matter that can cause respiratory ailments. The proposed rule would require public disclosure of the underlying individual health data with the logic that the studies must be reproduceable. If the rule were adopted, the existing limits on PM2.5 could be challenged. These air rules offer critical health protection for the most vulnerable of our populations: low-income and minority communities living in the shadow of industrial facilities. According to a recent Harvard study, these are in many cases the same communities that are at greater risk of severe cases of COVID-19.

Where does this challenge to scientific integrity and rigor by certain regulators charged with protection of public health leave the regulated community? Does the regulated community have an obligation to undertake its own scientific inquiry if an agency abdicates its mandate? Would the regulated community be expected to mitigate health risks and impacts beyond what is required under law based on scientific studies that may meet existing peer review standards, but not EPA’s Strengthening Transparency rule? Should the regulated community pledge that operations will not adversely impact public health in the face of politicization of science by regulators?

Just as FDA is charged to protect patient health, EPA is charged to protect public health. The importance of rigorous scientific and regulatory processes for these agencies cannot be overstated. If they fail to maintain scientific integrity the rule of law falters, and the burden falls on the regulated community to assure the rigors of science are applied to protect our citizens. Public trust and public health protection are much better assured when expert regulators and the regulated community work together to maintain the integrity of science.

When Science Is Influenced by Politics, It's Not Good for Business.

Science and the Value of Native Americans' Ancient World View
Author
Craig M. Pease - Scientist and Former Law School Professor
Scientist and Former Law School Professor
Current Issue
November-December 2020
Issue
6
Craig M. Pease

The landmark Indian treaty fishing rights case Sohappy vs. Smith (later consolidated into United States vs. Oregon) recently marked its 50th anniversary. Despite the fact that the Native Americans prevailed in the case, the entire management edifice of Pacific Northwest lamprey, steelhead, and salmon is grounded not at all in the worldview of the Indian tribes. Rather, it resides in the formal structures of modern environmental law and contemporary science.

Yet in critical ways, Native American thinking and knowledge about these fish eclipse scientific knowledge. I commend to the reader Sammy Matsaw and colleagues’ 2020 article “Cultural Linguistics and Treaty Language” in the recent Lewis and Clark Environmental Law Review symposium volume devoted to this case. What I find striking here is not the immense scientific literature on anadromous fish, but rather what Native American perspectives teach us about the limits, the core assumptions, and the alternatives to science.

Science is useful and powerful -— within its domain. But that domain has limits. Cultural linguistics makes apparent (to me anyway) that one key limit of science arises from how it creates boundaries around little chunks of the world. This atomization is ubiquitous in science — consider how scientists purport to identify discrete entities they call genes, nucleotides, chemical elements, mathematical symbols, ecosystems, and species. Much of science entails defining those units of nature (via “words,” also known as “abstract symbols” or “data”), and inferring rules for their manipulation (“grammar,” also known as “graphs,” “equations” or “models”).

So too, environmental law entails giving special meaning to words describing discrete ideas, for example the concepts of a hard look, unreasonable risk, preemption, or the elements of a tort. Less abstractly, the Fish and Wildlife Service, denying the petition to list the lamprey, said the key reason was its inability to define a Distinct Population Segment. Legal arguments often dispute whether a particular concept applies to a particular set of facts — thus they are often a dispute over the boundary of a legal concept. Implicit in all this is the idea that boundaries exist.

It is impossible to overstate the importance of deep, implicit assumptions in the structures of the English, legal, and scientific languages. As Matsaw and colleagues state, “Forcing a foreign language onto Indigenous lands is similar to building fences, roads, dams, plowing crops, and extracting minerals.” Native American language focuses on process rather than physical things (that is, verbs over nouns). Their culture sees the natural world not as something with so many distinct parts and distinct ideas, but rather where things are inextricably linked. This is qualitatively distinct from science, where we cut off little chunks of nature, identify them, manipulate them, and study them.

There is, however, contemporary science somewhat more consistent with the Native American perspective. Computational systems dubbed cellular automata constitute one scientific model that captures the essence of discrete units interacting with one another. The key result here is that there is no way to predict the future behavior (in technical lingo, the state) of a universal computer, except by letting it play out over time (for example breaking such a complex system into parts and building a model of it does no good). This result is well known in complex systems, yet also refutes the idea that atomization that underlies much science will necessarily lead to knowledge. Beyond that, the Native American worldview is that humans are not just observers of complex natural systems, but integrated into them.

As I understand it, Native Americans integrate hard knowledge, spirituality, and how we treat other people and animals into an irreducible whole. Further, this perspective celebrates and appreciates the unique life story of each individual person and animal. Consistent with the teachings of cellular automata rule 110 and Native Americans, truly each of us is on a different path, yet united within a whole.

Native Americans are not just another stakeholder. Contemporary environmental law and modern science have existed a scant 3 to 20 generations, delimiting the fossil-fuel era and the Renaissance. By contrast, Native American knowledge of nature is embedded in languages, symbolic structures, rituals, and stories that have allowed their cultures to persist over 500 generations.

When the worldview and core structure of societies that have persisted for millennia — and function well for their culture — are in apparent conflict with key implicit assumptions of modern life, law, and science, we should question the modern.

Science and the Value of Native Americans' Ancient World View.

Global Environmental Law
Global Environmental Law

All around the world, nations have established legal frameworks to protect our environment. While many of these frameworks share similar goals and objectives, they hold important differences as well. In Global Environmental Law, Justice Ricardo Luis Lorenzetti and Professor Pablo Lorenzetti offer a holistic view of modern environmental law.

Beyond Zero-Sum Environmentalism
Beyond Zero-Sum Environmentalism

Environmental law and environmental protection have long been portrayed as requiring tradeoffs between incompatible ends: “jobs versus environment;” “markets versus regulation;” “enforcement versus incentives.” Behind these views are a variety of concerns, including resistance to government regulation, skepticism about the importance or extent of environmental harms, and sometimes even pro-envi

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