Dive Brief:
- The U.S. Securities and Exchange Commission has disbanded its climate and ESG enforcement taskforce, after more than three years, an agency spokesperson confirmed to ESG Dive in an emailed statement Thursday. The action was first reported by Bloomberg Law the same day.
- The spokesperson said that the task force was formed to address greenwashing when it was an “emerging risk,” as investors became increasingly interested in climate- and ESG-related data and products, and the agency will use the enforcement strategies it learned to hold future companies accountable if it sees another rise in risk.
- The dissolution of the task force is another strike against the agency’s work on ESG-related topics. While the SEC continues to defend its climate-risk disclosure rule in court, it removed ESG as a 2024 priority for its Division of Examinations, and its proposed and final regulations on greenwashing and human capital disclosures look increasingly unlikely to be released before November’s presidential election.
Dive Insight:
The climate and ESG task force was launched in March 2021 by then-acting Commission Chair Allison Herren Lee, before being continued by Chair Gary Gensler. While in existence, the Enforcement Division’s task force brought actions against high profile companies like Goldman Sachs Asset Management, JPMorgan Chase’s securities arm, McDonald’s and video game maker Activision Blizzard.
The enforcement task force pursued cases against investment advisers for making misleading statements on ESG and violations of related policies and procedures. It also went after issuers for misleading investors on climate risks or green tech, and it hit companies for governance-related misconduct.
The SEC spokesperson told ESG Dive that the strategies developed through the cases were “effective” and the expertise “now resides across the [Enforcement] Division.”
“The Commission brought a number of important enforcement actions in the area which have sent a strong message to market participants about the importance of complying with the law when it comes to ESG considerations,” the spokesperson said. “If we see another uptick in misleading or false claims around ESG by issuers and ESG investing by advisers, like we are now seeing around AI washing, we will use the same tools we’ve used in the past to hold those violators accountable.”
Early notable actions by the agency included a $1.5 million settlement with financial institution BNY Mellon for misleading investors about its ESG considerations in May 2022 and a $4 million settlement with Goldman Sachs in November 2022 for violations of policies and procedures related to how ESG research was incorporated and monitored for securities.
Between January 2023 and January 2024, the task force charged at least four companies with governance misconduct claims: McDonald’s, Activision Blizzard, tool company Stanley Black & Decker and JPMorgan’s securities arm.
McDonald’s received no financial penalty after cooperating with the agency on charges related to the company and former CEO Stephen Easterbrook misleading investors about the circumstances that led to his termination. Activision Blizzard owns the title of the largest financial penalty imposed by the task force. It agreed to pay $35 million for violating the agency’s whistleblower protection rule and failing to maintain adequate workplace disclosure policies.
Black & Decker agreed to pay $1.3 million for not reporting executive perks and benefits in June 2023. JPMorgan, in one of the most recent actions by the task force, agreed to pay $18 million this January for violating the whistleblower protection rule through its use of confidentiality agreements in client settlements with the firm.
Companies that make misleading statements about artificial intelligence now appear to be of growing interest for the agency. In March, the agency settled charges against investment advisers Delphia and Global Predictions about false and misleading statements they made about their use of AI.
“As more and more investors consider using AI tools in making their investment decisions or deciding to invest in companies claiming to harness its transformational power, we are committed to protecting them against those engaged in ‘AI washing,’” SEC Enforcement Division Director Gurbir Grewal said in a release at the time.
