On March 4th, the SEC sent a very clear signal about one of its chief enforcement priorities by announcing the creation of a Climate and ESG Task Force within the Division of Enforcement. ESG stands for Environmental, Social, and Governance. From the labor and employment perspective, the “S” in ESG often relates to diversity, equity and inclusion, human capital development, employee working conditions and whether workers have a voice. These can encompass issues like pay equity; equal rights within the workplace; leave and safety issues, which are particularly relevant during the pandemic; and employee organizing.
Since Allison Herren Lee was named the Acting Chair of the SEC on January 21, 2021, the SEC has repeatedly signaled that Climate and ESG issues and disclosures will be an SEC priority. For instance, on February 1, 2021, the SEC announced that Acting Chair Lee would have, for the first time, a senior policy advisor solely dedicated to these issues. On February 24, 2021, Acting Chair Lee directed the Division of Corporation Finance to scrutinize disclosures for adherence to the SEC’s 2010 guidance on climate change-related disclosures. And just yesterday, the SEC’s Division of Examinations announced that in the context of inspections, “emerging risks, including those relating to climate and ESG,” will be a priority. The announcement is the most significant sign to date about the seriousness with which the SEC is studying Climate and ESG issues.