Did New York Attorney General Eric Schneiderman investigate Peabody Energy to protect shareholders against “misrepresentation” of climate-related shareholder risks? No. Schneiderman’s investigation is part of the broader political campaign against fossil fuels. While it goes by various names – “war on coal,” “divestment,” “keep it in the ground,” or “climate action” – the goal is clear: suppress the production and use of energy from coal, gas, and oil. Schneiderman investigated Peabody under New York’s Martin Act, a securitiesfraud statute with a low bar for establishing guilt. To convict, the prosecutor need not prove intent to defraud, shareholder injury, or even that the company made false statements. Rather, he only has to show that the company omitted “material” facts in shareholder communications.
In his settlement agreement with Peabody, Schneiderman faults the company for: (1) claiming an inability to “reasonably predict” the financial impacts of potential climate policies; (2) citing one set of International Energy Agency (IEA) coal market projections but not others; and, (3) not publishing the results of analyses Peabody conducted or commissioned on the coal market impacts of particular climate policies. Schneiderman does not call those actions fraud, but rather “misrepresentation” of “material” facts. Accordingly, the settlement agreement does not impose fines, damage awards, or jail sentences. Rather, Peabody agrees henceforth to abstain from claiming an inability to predict the costs of potential climate policies, disclose any cost estimates it makes, and include all coal market projections by experts it cites.