The federal district court for the District of Maryland dismissed a securities action against senior officers and underwriters of Enviva, Inc., a biomass energy company that produces wood pellets. The plaintiff alleged that the officers misled ESG-focused investors with statements that materially misrepresented the company’s environmental sustainability, including statements regarding reduced greenhouse gas emissions from using wood pellets instead of fossil fuels to generate energy. The plaintiff further alleged that the officers’ statements and a registration statement were misleading because Enviva used whole trees rather than scrap wood to make its wood pellets, and that use of such pellets to generate energy produced greater greenhouse gas emissions than burning coal. Regarding the plaintiff’s claims regarding misrepresentations under Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, the court found that the plaintiff failed to allege a material misrepresentation or scienter (i.e., that the defendants acted with intentional or reckless deception). Regarding scienter, the court rejected, among other arguments, the plaintiff’s contention that the defendants were motivated to greenwash Enviva’s operations because they could lose foreign subsidies if the operations were found not to be carbon neutral. The court also dismissed claims under Section 20(a) of the Exchange Act and Sections 11 and 15 of the Securities Act of 1933.

Securities class action lawsuit alleging that a company that develops, constructs, acquires, and owns and operates wood pellet production plants misrepresented the environmental sustainability of its business.

Fanucchi v. Enviva Inc.

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Maryland Federal Court Dismissed Securities Action Alleging Wood Pellet Producer Officers and Underwriters Made Misleading Sustainability Statements

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United States of America

Maryland

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Maryland Federal Court Dismissed Securities Action Alleging Wood Pellet Producer Officers and Underwriters Made Misleading Sustainability Statements

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance