April 5, 2021
Focusing the Lens: Two "Need-to-Know" ESG Developments
Environmental Edge: Climate Change & Regulatory Insights
Since the Biden-Harris Administration took office, hardly a day has passed without a new, significant development on environmental, social and governance (ESG) issues. Keeping apace with this flurry of activity is no small feat, but two SEC developments on climate-related disclosures warrant particular attention: (1) the creation of the a Climate and ESG Task Force in its Division of Enforcement, and (2) a broad solicitation for public input on the Commission's climate disclosure-related rules and guidance.
First, the Enforcement Task Force. This division-wide effort will bring together a group of 22 enforcement specialists and attorneys to develop initiatives to identify "ESG-related misconduct," with an initial focus of identifying "any material gaps or misstatements in issuers' disclosure of climate risks under existing rules." In addition to reviewing public company disclosures, the task force will analyze disclosure and compliance issues relating to "investment advisers' and funds' ESG strategies." In carrying out its mission, the task force will work closely with other SEC Divisions and Offices, including Corporation Finance, Investment Management, and Examinations, and will use "sophisticated data analysis to mine and assess" registrant information for potential violations.
Second, on March 15th, Acting SEC Chair Allison Herren Lee announced that SEC staff are currently undertaking an evaluation of disclosure rules with particular focus on facilitating disclosure of "consistent, comparable, and reliable information on climate change." The statement seeks input from stakeholders on a comprehensive list of question relevant to aiding the staff's analysis of these issues and the Commission's potential development of a new framework of rules and/or guidance around climate-related disclosures. The questions provide insights into a range of potential regulatory options the Commission is evaluating, while, significantly, signaling its openness to stakeholder feedback on myriad approaches to these complicated issues. The deadline for submittal of comments is June 13, 2021 (90 days after Acting Chair Lee's statement).
Both developments warrant stakeholders’ close attention. The first (enforcement prioritization) warrants proactive review of a company's existing approach to disclosures under current SEC Climate Guidance to avoid getting ensnared in the Enforcement Task Force's cross-hairs; the second (opportunity to comment) offers stakeholders the chance to shape forthcoming climate disclosure requirements to ensure they are feasible, not unduly burdensome, and consistent with the organization's current approaches and goals.
For additional information on ESG, see our March 9, 2021 Advisory which presents a deeper analysis of climate-related disclosure developments and recommendations, as well as our February 18, 2021 Advisory regarding ESG considerations for the financial services industry.
First, the Enforcement Task Force. This division-wide effort will bring together a group of 22 enforcement specialists and attorneys to develop initiatives to identify "ESG-related misconduct," with an initial focus of identifying "any material gaps or misstatements in issuers' disclosure of climate risks under existing rules." In addition to reviewing public company disclosures, the task force will analyze disclosure and compliance issues relating to "investment advisers' and funds' ESG strategies." In carrying out its mission, the task force will work closely with other SEC Divisions and Offices, including Corporation Finance, Investment Management, and Examinations, and will use "sophisticated data analysis to mine and assess" registrant information for potential violations.
Second, on March 15th, Acting SEC Chair Allison Herren Lee announced that SEC staff are currently undertaking an evaluation of disclosure rules with particular focus on facilitating disclosure of "consistent, comparable, and reliable information on climate change." The statement seeks input from stakeholders on a comprehensive list of question relevant to aiding the staff's analysis of these issues and the Commission's potential development of a new framework of rules and/or guidance around climate-related disclosures. The questions provide insights into a range of potential regulatory options the Commission is evaluating, while, significantly, signaling its openness to stakeholder feedback on myriad approaches to these complicated issues. The deadline for submittal of comments is June 13, 2021 (90 days after Acting Chair Lee's statement).
Both developments warrant stakeholders’ close attention. The first (enforcement prioritization) warrants proactive review of a company's existing approach to disclosures under current SEC Climate Guidance to avoid getting ensnared in the Enforcement Task Force's cross-hairs; the second (opportunity to comment) offers stakeholders the chance to shape forthcoming climate disclosure requirements to ensure they are feasible, not unduly burdensome, and consistent with the organization's current approaches and goals.
For additional information on ESG, see our March 9, 2021 Advisory which presents a deeper analysis of climate-related disclosure developments and recommendations, as well as our February 18, 2021 Advisory regarding ESG considerations for the financial services industry.
© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.
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