That was quick! Following last week’s SEC announcement that Corp Fin will be scrutinizing climate-related disclosures, yesterday the SEC issued an announcement about creation of an Enforcement Division Task Force focused on climate and ESG. Acting Deputy Director of Enforcement Kelly Gibson will lead the task force, which will include 22 members. Here’s an excerpt from the SEC’s press release:
Consistent with increasing investor focus and reliance on climate and ESG-related disclosure and investment, the Climate and ESG Task Force will develop initiatives to proactively identify ESG-related misconduct. The task force will also coordinate the effective use of Division resources, including through the use of sophisticated data analysis to mine and assess information across registrants, to identify potential violations.
The initial focus will be to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.
Besides noting that the task force will work closely with other SEC Divisions and offices, the announcement says the task force will pursue tips and referrals on ESG-related issues and includes a link to the agency’s TCR webpage for submitting tips, referrals and whistleblower complaints.
With the earlier announcement directing Corp Fin to scrutinize climate-related disclosures and now with the creation of an Enforcement Division climate and ESG task force, the SEC’s sending a message that it intends to focus and dedicate resources to review of climate and ESG disclosures. Yesterday’s announcement also follows Wednesday’s announcement of priorities for the Examinations Division for climate risks relating to brokers and investment advisors, as it seems like they’re going to scrutinize ESG investments. The announcement about Examinations Division priorities includes mention that they’ll review investment advisors and investment company proxy voting policies and procedures and votes to assess whether they align with the strategies.
In an apparent effort to add context to these recent announcements, Commissioners Hester Peirce and Elad Roisman issued a statement saying time will tell what these recent announcements really mean because right now it’s not yet clear. Commissioners Roisman and Peirce note that the Enforcement Division will continue to identify, investigate, and bring actions against those who violate SEC laws and rules but such actions would not be based on any new standard.
In response to these recent announcements, some may want to step-up their efforts around climate-related disclosures. As a resource to help those reviewing and preparing climate-related disclosures, check out the “Internal Controls” memos in our “ESG” Practice Area.
-Lynn Jokela, TheCorporateCounsel.net March 5, 2021