The Securities and Exchange Commission (SEC) plans to get tough with US-based companies when it comes to misconduct related to environmental, social and governance (ESG) issues.
The US regulator has formed a climate and ESG task force within the enforcement division, led by acting deputy director Kelly Gibson, who will oversee 22 SEC staffers drawn from headquarters, regional offices and enforcement units.
The task force will develop initiatives to identify ESG-related wrongdoing and coordinate resources, including data, to find potential violations.
It will focus initially on identifying material gaps or mis-statements in issuers’ disclosure of climate risks under existing rules.
The task force will also analyse disclosure and compliance issues relating to investment advisors’ and funds’ ESG strategies, working closely with Satyam Khanna, the commission’s new senior policy advisor for climate and ESG.
It will collaborate with other SEC units and offices, including the corporation finance, investment management and examinations divisions.
One step further?
“Climate risks and sustainability are critical issues for the investing public and our capital markets,” acting chairwoman Allison Herren Lee said.
“The task force ... will play an important role in enhancing and coordinating the efforts of the division of enforcement, the Office of the Whistleblower and other parts of the agency to bolster the efforts of the commission as a whole on these vital matters.”
The SEC may take this enforcement initiative a step further one day by requiring US-based companies to disclose their ESG activities, as European Union-based companies must do today.
“It’s time to move from the question of ‘if’ to the more difficult question of ‘how’ we obtain disclosure on climate,” Lee said in speech to the Center for American Progress last month.
But for now, the task force will address emerging ESG-related disclosure gaps that threaten investors and the market in general.
“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.
It will evaluate and pursue tips, referrals and whistleblower complaints, and provide expertise and insight to teams working on ESG-related matters across the division.
