Asset AllocationMarch 10, 2021

SEC Launches Climate, ESG Enforcement Task Force

The team of 22 will identify ESG-related misconduct and focus on climate risk disclosures.

Reported by Michael Katz

The US Securities and Exchange Commission (SEC) has launched a 22-member climate and environmental, social, and governance (ESG) task force within the regulator’s Division of Enforcement.

Kelly Gibson, the acting deputy director of enforcement, will lead the task force, which will draw its team members from the SEC’s headquarters, regional offices, and enforcement specialized units.

In addition to creating initiatives to identify ESG-related misconduct, the task force will also coordinate the use of division resources, such as sophisticated data analysis, to mine and assess information across registrants in order to identify potential violations. The team will initially focus on identifying any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules. It will also analyze disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies.

The task force will also work with the SEC’s other divisions and offices, including the divisions of corporation finance, investment management, and examinations, as well as the recently created position of senior policy adviser for climate and ESG. In February, the SEC named Satyam Khanna to the new role. Khanna will advise the agency on ESG matters and advance related new initiatives across its offices and divisions.

The Climate and ESG Task Force will also evaluate and pursue tips, referrals, and whistleblower complaints on ESG-related issues, and provide expertise and insight to teams within the SEC working on ESG-related matters.

“This task force brings together a broad array of experience and expertise, which will allow us to better police the market, pursue misconduct, and protect investors,” Gibson said in a statement.

The new task force was unveiled the day after the SEC announced its examination priorities for 2021, in which it said climate risks in the markets will be scrutinized closely this year. The regulator said it will review proxy voting policies for investor risks on climate change and ESG matters, and determine whether firms’ practices are in line with the sustainability disclosures they provide investors, particularly for ESG open-end funds and exchange-traded funds (ETFs).