The SEC recently announced its yearly summary of enforcement activity. Among the items it chose to highlight were its efforts to enforce ESG-related issues. ESG was one of only a handful of subject matter areas that the SEC chose to highlight; others included crypto, cybersecurity and compliance, and the Foreign Corrupt Practices Act. The inclusion of ESG issues on this summary reflects the significant priority that the SEC continues to assign to this area.

Notably, the SEC chose to highlight three enforcement actions relating to ESG, two of which have been widely reported (including by this blog) (; (Those two actions concerned misstatements in ESG disclosures and misstatements about use of ESG considerations in making investments.) But the third enforcement action identified by the SEC concerned charges brought against an entity that "had marketed itself as providing advisory services compliant with Islamic, or Shari'ah law, but failed to adopt and implement written policies and procedures addressing how it would assure Shari'ah compliance on an ongoing basis." While the fact that the SEC brought charges against an entity for allegedly misleading disclosures is hardly surprising, the fact that it chose to include allegations of failure to comply with Shari'ah guidelines within its compilation of ESG enforcement actions is noteworthy. This suggests a wider, or more diffuse, definition of ESG concerns than is typical.

In any event, the fact that the SEC chose to emphasize ESG enforcement actions as part of its yearly update reflects the SEC's continuing focus on these issues, and so additional enforcement actions in this area should be anticipated over the coming year.

Environmental, social, and governance (ESG) concerns have grown increasingly important to many investors. As a result, the Division has focused attention on these issues with respect to public companies and investment products and strategies. In doing so, the staff applies time-tested principles concerning materiality, accuracy of disclosures, and fiduciary duty, as codified in federal statutes, regulations, and case law. These efforts resulted in SEC enforcement actions . . . .