Is an SEC ESG crackdown imminent (2022)
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According to Bloomberg Law, a recent spate of activity by the Securities and Exchange Commission’s (SEC) Climate and ESG Task Force “Hints at Looming Crackdown on ESG Claims.” Last Wednesday, the newswire noted that SEC Chairman Gary Gensler is facing political pressure to ramp up ESG enforcement and suggested that this pressure might be the source of the task force’s recent activity and might also portent even more action:
"A new SEC task force to police corporate environmental, social and governance disclosures is gradually ramping up enforcement, putting companies on notice.
"The Securities and Exchange Commission created its Climate and ESG Task Force a year and a half ago. The unit has mostly kept working behind the scenes. But in the last four months, it has helped bring at least three enforcement actions, according to agency records.
"Companies that have faced allegations of misleading ESG claims include Bank of New York Mellon Corp., health insurance distributor Benefytt Technologies Inc., and Brazilian mining company Vale S.A.
"The SEC is working on new rules to combat bogus ESG claims by investment funds and to force companies to disclose how climate change affects their operations. New rules or not, SEC Chair Gary Gensler is facing pressure from Democrats and investor advocates to guard against misleading corporate disclosures about climate change and other ESG issues.
"The task force’s actions, which started to become public this spring, are likely just the beginning, with more cases expected soon, corporate lawyers told Bloomberg Law. SEC investigations often take more than a year to complete, they said.
"'The SEC’s fiscal year-end in September traditionally brings a flurry of cases,' said Kevin Muhlendorf, a Wiley Rein LLP partner and former agency lawyer, who advises companies on ESG matters.
"'I don’t think it’s all bark and no bite,” Muhlendorf said of the task force. “Anytime you create one of these task forces, there’s going to be actions.'”
Bloomberg continued, suggesting that financial giant Goldman Sachs may well be the next target in the task force’s sites:
"Goldman Sachs Group Inc. may be the task force’s next announced case.
"The SEC is investigating claims the banking giant’s funds didn’t align with ESG metrics touted in marketing material, Bloomberg News reported in June.
"The report came after the agency announced in May that BNY Mellon agreed to pay $1.5 million to settle claims of ESG misstatements concerning its funds, without admitting or denying any wrongdoing."
See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
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