Using a baseball metaphor, spring training is over – we’re in SEC ESG enforcement regular season. First there was the SEC Division of Enforcement Climate and ESG Task Force’s inaugural enforcement action against Brazilian mining company Vale at the beginning of this month.
Last week, the SEC announced a public meeting for tomorrow to:
… consider whether to propose amendments to rules and reporting forms for registered investment advisers, certain advisers exempt from registration, registered investment companies, and business development companies to provide standardized environmental, social, and governance (“ESG”) disclosure to investors and the Commission.
And as if to emphasize they are serious about this, just yesterday they filed an enforcement action against:
… BNY Mellon Investment Adviser, Inc. for misstatements and omissions about Environmental, Social, and Governance (ESG) considerations in making investment decisions for certain mutual funds that it managed.
They probably won’t be playing small ball for long.
This Matters to More Than Investment Funds
SEC’s actions are a big deal even for companies in which funds invest because the risk of not living up to public ESG commitments or statements applies universally. It is no stretch at all to expect the SEC to begin investigating claims of greenwashing at manufacturers, service providers, transportation and delivery companies, those in the technology, hardware and semiconductor industry and energy/power utility sectors. If your company is regulated by the SEC and indicates that ESG activities, goals and/or attributes are meaningful to your business, then at the very least that implies ESG is potentially material. Companies that publish an ESG/sustainability report that includes a materiality assessment aren’t merely implying ESG materiality. And the SEC doesn’t need to promulgate new rules to enforce managing risks or matters that companies themselves claim are material to their business.
Proper governance of corporate E & S activities for operating companies and disclosure thereof lies at the heart of minimizing or reducing the associated risk. PracticalESG.com members can access the transcript of and replay our May 10 webcast – Putting the ‘G’ First: Oversight of ‘E’ & ‘S’ in ESG for perspectives on implementing effective E&S oversight from Sunrun, Delta Air Lines, American Express and Orrick.