On February 1, 2020, the US Securities and Exchange Commission (SEC) announced the appointment of the regulator’s first dedicated ESG policy advisor. This significant development for ESG regulation in the United States follows President Biden’s nomination of Marty Walsh as Secretary of Labor, as well as his appointment of Brian Deese as the head of the National Economic Council—both noteworthy for their ESG-related expertise in the public and private sectors, respectively.
In this Blog Post, we discuss these developments and what they could mean for the future of ESG regulation in the United States.
At the SEC, Satyam Khanna will serve as Senior Policy Advisor for Climate and ESG. In this new role, Mr. Khanna will advise the agency on ESG matters and advance related new initiatives across its offices and divisions. Mr. Khanna was most recently a resident fellow at NYU School of Law’s Institute for Corporate Governance and Finance and was previously a member of the SEC’s Investor Advisory Committee. He also served as a senior advisor to the UN’s Principles for Responsible Investment, one of the world’s leading proponents for responsible investment among asset owners, investment managers and service providers.
In early December, President Biden brought ESG-related expertise from an institutional investor perspective to the White House by appointing Brian Deese, the former Global Head of Sustainable Investing at BlackRock, as the Director of the National Economic Council (NEC). Prior to joining the NEC, Mr. Deese oversaw sustainable investment for the world’s largest asset manager at a time when climate change became central to its business practices. At the NEC, Mr. Deese will draw from this experience in advising President Biden on US and global economic policy.
Mr. Khanna and Mr. Deese could, at the SEC and the White House, respectively, focus on developing the US approach to an area that is increasingly attracting the attention of regulators elsewhere around the world: ESG disclosures. So far, these efforts have principally focused on climate-related disclosures, with regulators in two of the world’s leading financial centers, Hong Kong and the United Kingdom, recently committing to implement the Recommendations of the Task-Force on Climate-related Financial Disclosures (TCFD). The TCFD Recommendations, developed by an industry-led group including BlackRock, are one of the world’s leading frameworks for reporting climate-related financial information. As the US seeks to reengage with the global community on a range of issues, including climate change, the implementation of an ESG-related disclosure regime could be part of the strategy.
In the public sector, President Biden’s pick for Secretary of Labor, Marty Walsh, has been a staunch proponent of ESG investing during his tenure as the Mayor of Boston. He committed US$200 million of funding for the city’s ESG Investment Initiative, which he founded in 2019 to invest Boston’s operating funds into short-term fixed income securities of companies with strong ESG practices. In connection with those efforts, the city joined the Ceres Investor Network, an institutional investor group overseen by the organization that launched the Global Reporting Initiative, one of the world’s most successful ESG reporting standards.
If confirmed, Mayor Walsh’s ESG experience will be immediately relevant. On January 20, President Biden directed the Department of Labor to review a rule finalized late last year that prevents private pension plan fiduciaries from considering ESG factors in investment decisions.
As officials with a range of ESG-related expertise join this new administration, it seems market participants can expect a similarly broad range of ESG-related regulatory and policy initiatives to follow.