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SEC Forms Enforcement Task Force As Federal ESG Emphasis Gains Steam

The Securities and Exchange Commission has created a task force in its Division of Enforcement to develop strategies to identify misconduct related to environmental, social and corporate governance, or ESG. As entities that register their securities with the agency, REITs will fall under the scope of any initiatives created by the new task force.

Securities and Exchange Commission HQ in Washington, D.C.

The task force's initial focus will be to identify gaps or misstatements in the disclosure of climate risks under existing rules. It will also analyze disclosure and compliance issues relating to investment advisers and funds’ ESG strategies.

As part of the agency’s efforts to police risks to investors, the task force will work with other SEC divisions and offices, including the Divisions of Corporation Finance, Investment Management and Examinations. It will evaluate and pursue tips, referrals and whistleblower complaints on ESG-related issues.

Kelly Gibson, the SEC’s acting deputy director of enforcement, will lead the task force, which will comprise 22 members drawn from SEC headquarters, regional offices and various specialized enforcement units.

"Climate risks and sustainability are critical issues for the investing public and our capital markets,” SEC acting Director Allison Herren Lee said in a statement. “The task force ... will play an important role in enhancing and coordinating the efforts of the Division of Enforcement, the Office of the Whistleblower and other parts of the agency to bolster the efforts of the Commission as a whole.”

If confirmed by the Senate, President Joe Biden's nominee to head the SEC, Gary Gensler, is expected to put a strong emphasis on ESG enforcement, the National Law Review reports. The Department of Labor and the Environmental Protection Agency are likewise expected to take up ESG enforcement more vigorously under the Biden administration.

The SEC is no stranger to ESG enforcement, with corporate governance a concern of the agency since its founding and environmental disclosures for public companies mandated by the agency as long ago as the 1970s.