New SEC Task Force Further Demonstrates Biden Administration’s Sharp Focus on Climate and ESG Issues
Last week, the U.S. Securities and Exchange Commission (SEC) announced the creation of a new 22-person Climate and Environmental, Social, and Governance (ESG) Task Force in its Division of Enforcement, a notable development in a series of recent steps taken by the Biden administration focused on increasing ESG accountability.
The task force will use sophisticated data analytics to mine information across registrants and proactively identify potential ESG-related misconduct, including material gaps and misstatements in companies’ required disclosure of climate risks under existing rules and guidance. The task force will also analyze disclosure and compliance issues relating to ESG investment strategies. Finally, the task force will investigate whistleblower complaints as well as evaluate and pursue tips on ESG-related issues.
While the creation of this task force does not put additional requirements on companies that are already making climate- or ESG-related disclosures under current rules and regulations, it does signify a dedication of SEC resources to taking a keen look at climate- and ESG-related information that would otherwise be handled in the ordinary course by the Division of Enforcement. One area of focus may be whether required disclosures match with policies and lobbying that occur outside of the public company disclosure process. For companies who file with the SEC, this means that now might be a good time to review climate- and ESG-related disclosures and ensure that the information being disclosed is accurate.
In January, we anticipated that the Biden administration might seek to amplify ESG reporting in the United States, including rejoining the Paris Climate Accord, taking steps to temper the effect of a U.S. Department of Labor Final Rule regarding investment decisions by pension funds, and taking executive action to reduce fossil fuel reliance by the federal government.
The Climate and ESG Task Force’s creation falls in line with these actions and comes on the heels of several other ESG-related policy decisions within the SEC. In early February, SEC Acting Chair Allison Herren Lee appointed Satyam Khanna as a senior policy advisor for Climate and ESG. In late February, Lee continued ESG-focused decisions by directing the Division of Corporation Finance to revisit and update the agency’s 2010 guidance on climate-related disclosures in public company filings. And just a day before the announcement of the task force’s creation, the SEC Division of Examinations announced that climate and ESG-related risks are a “central 2021 examination priority.”