In March 2021, to great fanfare, the SEC announced its formation of a Climate and ESG Task Force to “develop initiatives to proactively identify ESG-related misconduct,” as well as to “coordinate the effective use of Division resources, including through the use of sophisticated data analysis to mine and assess information across registrants, to identify potential violations.” Now, it turns out that, much more quietly, the agency has disbanded the Task Force. As first reported in a September 12, 2024, Bloomberg article (here), the SEC shut down the Task Force “within the past few months.”

There was a time shortly after its launch that the Task Force’s activities were visible in several enforcement actions, some of them of a high-profile nature. For example, as discussed here, in April 2022, the SEC brought an enforcement action against the Brazilian mining company Vale, S.A., in which the agency alleged that the company many fraudulent and misleading statements, in its Sustainability report and elsewhere, about the safety of its mining dams in Brazil, prior to a mine collapse disaster.

At the time the agency filed the Vale enforcement action, many commentators, including me, interpreted the action as a message that the SEC was focused on ESG-related misrepresentations. For example, I said at the time that the Vale action allegations “seem to suggest that the SEC has firmly and deliberately taken up the ESG flag. The SEC’s vigorous assertion of the environmental and social harms the company allegedly caused strongly suggests the agency’s willingness to take up the ESG cause, and, at a minimum, take actions to protect interests beyond just those of investors.”

However, since the time of the agency’s earlier ESG-focused actions, there apparently has been less ESG-related activity. The Bloomberg article to which I linked above suggests that at least part of the reason the SEC seemingly has stepped back from its apparent ESG forward approach has to do with the ESG backlash, in which conservative politicians have targeted investment vehicles and corporate activities with an express ESG focus. Among other things, the SEC earlier this year apparently dropped ESG from its list of compliance exam priorities.

In a statement explaining the SEC’s action to disband the task force, an SEC spokesperson said that the “strategy has been effective, and the expertise developed by the task force now resides across the Division.” Indeed, at least some recent activity suggests that even if the Task Force itself has been disbanded, the ESG mission has not been abandoned altogether. For example, as discussed here, the SEC’s recent settled enforcement action brought against Keurig Dr. Pepper for the company’s sustainability claims demonstrates that the company continues to address ESG-related misrepresentations.

In addition, the SEC continues to pursue its efforts to put its climate change disclose guidelines into effect; to be sure, the SEC has stayed the guidelines pending the outcome of the legal challenges to the guidelines now pending in the Eighth Circuit, but the agency clearly continues to aim to required companies make the disclosures the guidelines require. So to that extent at least, ESG-related goals clearly remain on the current SEC’s agenda.

In a September 13, 2024, memo about the Task Force being disbanded (here), the Crowell & Moring law firm noted that the three years of the Task Force’s existence was marked by “industry resistance and a mixed record in the courts.” The memo also notes, as observed above, that even if the agency has stepped away from “full throated” support of ESG and climate change issues, the agency is still pursuing certain ESG objectives. The memo concludes by noting that regardless of the fact that the Task Force has been disbanded, “public companies should continue to monitor their climate and ESG related disclosures, as a material misstatement about an ESG issue exposes companies to the same risks as any other material misstatement.”  

A September 20, 2024, memo by the Wachtel Lipton law form posted on the CLS Blue Sky Blog (here), also notes that notwithstanding the Task Force’s disbanding, regulatory concerns about greenwashing continue to grow and regulators other than the SEC have sought to tackle greenwashing disclosures through regulatory actions. The memo notes that:

California has adopted new disclosure rules on emissions, climate risks, and carbon offsets; the Federal Trade Commission is expected to issue updates to its Green Guides; the European Union’s greenwashing directive which entered into force in March prohibits unsubstantiated environmental claims; and the U.K.’s Financial Conduct Authority’s anti-greenwashing rule, which came into effect in May, requires that companies’ sustainability-related claims about their products and services be “fair, clear and not misleading.”

The bottom line is that, notwithstanding the Task Force’s disbanding, companies continue to face scrutiny – from the SEC as well as from other regulators – with respect to their ESG-related disclosures, and in particular, greenwashing remains a particular concern.