Over the last few months, the U.S. Securities and Exchange Commission (“SEC”) discretely disbanded the Climate and ESG Taskforce (“ESG Task Force”) of its Division of Enforcement. The move follows a wave of recent pushback against ESG by some companies and investors, along with certain U.S. state officials and courts.
The ESG Task Force, established in 2021, had been charged by the SEC with identifying ESG-related misconduct and evaluating ESG-related whistleblower complaints. During its brief existence, the ESG Task Force pursued a handful of significant enforcement actions. For instance, in May 2022 the ESG Task Force charged BNY Mellon Investment Adviser, Inc. for material misstatements and omissions related to considerations of ESG matters in making investment decisions for certain mutual funds that it incorrectly represented as subject to an ESG quality review. The ESG Task Force also reached a $55.9 million settlement with Vale S.A. in March 2023 for false and misleading disclosures by Vale S.A. about its ESG efforts.
While the ESG Task Force no longer exists, reports of the death of ESG at the SEC may be greatly exaggerated. Although no longer housed within a single group, the responsibilities and expertise of the ESG Task Force will likely now be dispersed throughout the agency. Furthermore, issuers still face liability for any material misstatements or omissions, ESG-related or otherwise, in their disclosures, with the SEC increasingly scrutinizing topics such as greenwashing. The SEC remains focused on ESG-related topics at the macro level as well, with the recently announced Spring 2024 Regulatory Agenda continuing to include topics such as corporate board diversity and human capital management disclosure.
Accordingly, companies should continue to ensure the accuracy and consistency of their ESG-related disclosures. Companies should also continue to regularly confirm their policies and procedures are designed to prevent inaccurate or incomplete statements. Finally, companies should be mindful about making only statements they can substantiate, as private litigants and left-leaning attorneys general continue to pursue actions against companies for greenwashing.
