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Unraveling the March 4th ESG updates from the SEC

March 8, 2021 | Insights, News,
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March 4th was an eventful day for the Securities and Exchange Commission (SEC), with conflicting messages that left the business community confused and concerned for how to prepare their companies to respond. Here we share a breakdown of the updates from the SEC, what is known and unknown, and how to proceed in the near term.

The overview:

  • Public contradictions have been made in recent ESG announcements from the SEC
  • There is not yet resolution on the way forward, but there are already some implications for reporting companies (issuers) and investors
  • Game on: The embedding of ESG into investing has led to integration into securities regulation writ large
  • Many of the near-term implications are for asset managers with investment products making ESG claims
  • For securities issuers, expect your finance & regulated financial filings teams to pay extra attention to your ESG claims and disclosures

The 22-member Climate and ESG Task Force initially will look for “material gaps or misstatements in issuers’ disclosure of climate risks” under existing rules and will analyze “disclosure and compliance issues” related to ESG strategies used by investment advisers and funds.”

SEC Enforcement Task Force on ESG

It’s been widely speculated from before his inauguration that President Biden was angling to make the SEC a center of the new Administration’s first salvo on climate change and other corporate ESG topics. Biden’s Director of the National Economic Council Brian Deese was BlackRock’s Global Head of Sustainable Investing before joining the administration, giving him unique perspective on how capital market regulation might spur deepened corporate climate action. His appointment complements the executive actions Biden could take directly to address climate change, like rejoining the Paris Agreement.

More concrete signs of climate and ESG action came with the appointment of Satyam Khanna, a former commission and Treasury Department staffer, as the agency’s first senior policy adviser for climate and ESG. And Acting Chair Allison Herren Lee announced a review of climate-related disclosure in late February.

So, it wasn’t surprising on Thursday, March 4, 2021 when the SEC announced the formation of a Climate and ESG Task Force in the Division of Enforcement. This 22-member task force initially will look for “material gaps or misstatements in issuers’ disclosure of climate risks” under existing rules and will analyze “disclosure and compliance issues” related to ESG strategies used by investment advisers and funds.”

Including quotes from Herren Lee, the announcement made it clear that the new Task Force would work across multiple SEC divisions and offices around the country to accomplish its mission. It went on to explain it would use “sophisticated data analysis to mine and assess information across registrants, to identify potential violations” and offered a link to submit “tips, referrals, and whistleblower complaints on ESG-related issues.”

This is the kind of SEC news that sends shivers down the spine of CFOs, if only for the uncertainty it creates and the worrisome but unclear implications.

Commissioners push back on the SEC announcement

Later on March 4th, that same day, two Securities and Exchange Commissioners issued a statement on the SEC website essentially saying not so fast. The two Republican Commissioners, Hester Peirce and Elad Roisman issued a statement casting doubt on the actions of the SEC staff and Acting Commission Chair asking these questions:

  • “Do these announcements represent a change from current Commission practices or a continuation of the status quo with a new public relations twist? Time will tell.”
  • “Maybe the Enforcement Division is merely continuing ongoing efforts with a little extra fanfare… What does this ‘enhanced focus’ on climate-related matters mean? The short answer is it’s not clear yet.”

Staking out their territory as Commissioners as opposed to SEC staff, they made it clear that there were no new standards or expectations on ESG or climate. Perhaps most importantly, they explained that they expected the SEC to issue further guidance before taking enforcement actions.

They went on to list a number of technical reasons why the enforcement announcement and others on climate change are not comprehensive.

Stay Tuned for Upcoming Blogs on:

  • The International Accounting Standards Board on ESG integration and harmonizing ESG standards (GRI, SASB, International Integrated Reporting Framework and CSDB).
  • What to expect from EU Sustainable Finance Disclosure Regulation (SFDR)



So, the regulator in charge of stable and secure capital markets puts ESG on the agenda and pours oil on the water. It’s unknown when and how this will be resolved at the SEC, nonetheless, a couple of principles have become clear:

  • ESG is no longer a backwater of corporate disclosure, asset management, and securities law;
  • ESG will be under increased scrutiny from all angles and not all of the infrastructure built around ESG is ready for that;
  • Buckle up. This is merely the beginning of major changes we’ll see in the ESG space.

ESG professionals should:

  • Assess the clarity, relevance, completeness, and accuracy of your ESG disclosures in all channels including financial regulatory filings, annual reports, CSR reports, websites, sales & marketing materials and any others.
  • Assess the relationship of your ESG disclosures and commitments to financial fundamentals. There have been instances where GHG emission commitments have led accountants to question the financial assumptions of the useful life of some assets.
  • Reach out to your financial colleagues responsible for regulated financial filings to let them know you’re focused on these issues and ask if they want to discuss any specifics.

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