In case it escaped your notice a few months back—as it did mine—Bloomberg is now reporting that the SEC has “quietly disbanded” its Enforcement Division’s Climate and ESG Task Force. You remember the task force? Back in 2021, when Allison Herren Lee was Acting Chair of the SEC, she directed the staff of Corp Fin to “enhance its focus on climate-related disclosure in public company filings.” Shortly thereafter, the SEC announced that the new climate focus would not be limited to Corp Fin—the SEC had created a new Climate and ESG Task Force in the Division of Enforcement. While the initial focus of the Task Force was to identify any material gaps or misstatements in issuers’ disclosure of climate risks under then-existing rules, the remit of the Task Force went beyond climate to address other ESG issues. Lee said that the Task Force was designed to bolster the efforts of the SEC as a whole in addressing climate risk and sustainability, which were “critical issues for the investing public and our capital markets.” (See this PubCo post.) Now, an SEC spokesperson has advised Bloomberg that it has “shut down its Enforcement Division’s Climate and ESG Task Force within the past few months.”
The Task Force was composed of 22 members from the SEC’s headquarters, regional offices and Enforcement specialized units and led by the Deputy Director of Enforcement. According to the press release issued at the time, the Task Force was designed to “develop initiatives to proactively identify ESG-related misconduct,” and “coordinate the effective use of Division resources, including through the use of sophisticated data analysis to mine and assess information across registrants, to identify potential violations.” Bloomberg reports that the Task Force went on to help with a number of cases, including the SEC’s case against Brazilian miner Vale SA and others. (See this PubCo post.)
The Task Force was still a thing as late as January of this year as it approached its third anniversary, but Bloomberg reported at the time that the “full extent of the task force’s activity is unclear.” In response to a question at a conference about the status of the group, Enforcement Director Gurbir Grewal said that it was still on the lookout “for securities fraud tied to environmental, social and governance issues.” The confusion here, he added, is that sometimes “people view a task force or strike force as something along the lines of a collection of individuals exclusively looking at a certain set of cases.” The web page that was created to promote the Task Force disappeared in June, Bloomberg reports, but identified “16 ESG-related enforcement actions from 2008 to 2022, half of which predate the group’s launch.”
Why the shut down? In a statement, the SEC spokesperson said that the “strategy has been effective, and the expertise developed by the task force now resides across the Division.” (Was the SEC’s recent greenwashing case against Keurig (see this PubCo post) a reflection of this widespread expertise or originally a product of the Task Force?) But Bloomberg seems to speculate that ESG backlash might also be at work, reporting that the “SEC and companies increasingly are distancing themselves from the term ‘ESG’ and keeping initiatives in the space in limbo or using other language to refer to them amid a conservative-led backlash. The agency last year dropped ESG from a list of priorities for its examiners checking investment firms for compliance with agency rules.”
