September 26, 2021

Volume XI, Number 269

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SEC Movement on ESG Disclosures: SEC and Investors Enhance Focus on Climate Change and Other ESG Disclosures

It’s no secret that the Biden Administration is focused on environmental justice and climate change issues, as evidenced by the president’s selection of Congresswoman Debra Haaland as Secretary of the Interior and former EPA Administrator Gina McCarthy and former Secretary of State John Kerry as National Climate Advisor and Climate Envoy, respectively. The Administration’s engagement on these matters coincides with the increased focus by investors and public companies on Environmental, Social and Governance (“ESG”) issues. Blackrock has now followed its open letter from last year identifying climate change as a defining factor in companies’ long-term prospects with its 2021 Stewardship Expectations which highlight’s BlackRock’s “conviction that sustainability risk – and climate risk in particular – is investment risk.”

Furthering this focus, the Securities and Exchange Commission (“SEC”) created a Climate and ESG Task Force in its Division of Enforcement in early March to proactively identify potential misconduct related to ESG-related disclosures. The SEC stated that the task force will use “sophisticated data analysis to mine and assess information across registrants to identify potential violations” and that the Task Force’s initial objective will be to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules. The task force will also analyze disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies.

Acting SEC Chair Allison Herren Lee has also asked the SEC staff to evaluate the SEC’s “disclosure rules with an eye toward facilitating the disclosure of consistent, comparable, and reliable information on climate change.” At the same time, the SEC is seeking public input on climate change disclosures. The SEC has published a list of 15 questions seeking public input on creating disclosure of consistent, comparable, and reliable information on climate change, the materiality of climate-related disclosures, and the costs and benefits of different regulatory approaches to climate disclosure.

It seems highly likely that the actions the SEC will take under its new Task Force and “enhanced focus” on climate change and ESG disclosures will be more aggressive than what followed the issuance of the SEC’s 2010 Climate Change Guidance. Issuers should expect new rules that are much more prescriptive and extensive than the principles based 2010 Guidance. Public companies should consider a thorough review of their ESG-related disclosures that have been filed with the SEC to date to identify any gaps as well as to confirm and verify information provided in such disclosures or that is incorporated by reference in future filings. Such a gap analysis will help position issuers for a rigorous and robust review of ESG and climate change disclosures going forward. Issuers who have been feeling pressure from investors should now anticipate more requirements from the SEC to deliver clear statements about ESG matters. Issuers need to be sure that any statements are supportable and not viewed as an attempt at “green-washing.” Courts may find that unsupportable statements on environmental initiatives are not mere puffery but actionable causes of action under the anti-fraud laws.

© 2021 Foley & Lardner LLPNational Law Review, Volume XI, Number 85
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About this Author

Peter Tomasi, Foley Lardner, Environmental lawyer, regulations, environmental issues,
Of Counsel

Peter A. Tomasi is of counsel and a business lawyer with Foley & Lardner LLP, where he is a member of the firm’s Environmental Regulation Practice. His practice focuses on regulatory compliance and renewable energy. Mr. Tomasi has further experience with general civil, commercial, and intellectual property litigation.

Representative Experience

  • Representation of logistics providers and reverse distributors in rulemaking and enforcement matters involving hazardous waste pharmaceuticals
  • ...
414-297-5621
Michael B. Kirwan, Foley Lardner, Corporate Governance lawyer, Venture Capitalism matters Attorney
Partner

Michael B. Kirwan is a partner and business lawyer with Foley & Lardner LLP. He counsels business clients on securities, acquisitions, financings and corporate governance matters. Mr. Kirwan has worked on numerous public and private offerings, including IPOs and follow-on offerings, represented many companies on their periodic reporting obligations and other matters before the Securities and Exchange Commission, represented special committees of various boards of directors, and handled a variety of business combinations and venture capital matters. He has significant...

904-633-8913
Hilary Vedvig, Environmental attorney, Foley Lardner
Associate

Hillary Vedvig is an associate and business lawyer with Foley & Lardner LLP. She is a member of the Environmental Regulation Practice.

Ms. Vedvig was a summer associate with Foley where she worked on environmental, real estate, insurance and renewable energy projects. She also worked during the prior two summers for the Ombudsperson Institute of Kosovo, Pristina, Kosovo, as a legal advisor and for the European Human Rights Advocacy Center, London, UK, as a legal intern.

608-258-4263
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