Recognizing increased investor focus on environmental, social and governance (ESG) investing and reliance on ESG-related disclosure, the SEC has taken multiple steps recently that demonstrate a clear emphasis on climate and ESG-related investing. In addition, the Department of Labor (DOL) announced a non-enforcement policy relating to its recently finalized rules for investment duties and proxy voting for ESG investments.
SEC Announces New “Climate and ESG Task Force”
On March 4, 2021, the SEC announced the creation of a new “Climate and ESG Task Force” within the Division of Enforcement. The SEC stated that the task force will develop initiatives to proactively identify ESG-related misconduct, including through the use of sophisticated data analysis to mine and assess information to identify potential violations. The task force’s initial focus will be to identify material gaps or misstatements in issuers’ disclosure of climate risks under existing rules and to analyze disclosure and compliance issues relating to ESG strategies. In addition, the task force will evaluate and pursue tips, referrals and whistleblower complaints on ESG-related issues and provide expertise and insight to other SEC teams working on ESG-related matters.
The press release announcing the new task force is available here.
SEC Publishes Investor Bulletin and Launches Web Page on ESG Investing
On February 26, 2021, the SEC’s Office of Investor Education and Advocacy published an investor bulletin highlighting potential considerations for investors considering purchasing an ESG fund. The bulletin is intended to educate investors about ESG funds, and to provide questions that investors should consider when deciding whether to invest in ESG funds. Additionally, the SEC recently launched a web page designed to create a central repository of the SEC’s ESG-related efforts and the latest information about climate and ESG investing. The investor bulletin is available here. The web page is available here.
Department of Labor Announces Non-Enforcement Policy for ESG and Proxy Voting Rules
On March 10, 2021, the DOL released an enforcement policy statement indicating that the DOL will not enforce its recently published rules relating to investment duties and proxy voting for ESG investments. These rules were finalized in the final months of the prior administration and sought to constrain the ability of ERISA plan fiduciaries to select ESG funds for retirement plans by generally requiring fiduciaries to consider only “pecuniary factors” when selecting investment options. The DOL stated that, until further notice, it will not pursue enforcement actions against any plan fiduciary based on a failure to comply with the provisions of these rules. The DOL noted that it intends to revisit the rules but .not provide any guidance on how or when such rules may be revised or rescinded. The policy statement is available here.