Bohrer PLLC ESG Client Alert

March 08, 2021

SEC Announces Creation of Climate and ESG Task Force

On March 4, 2021, the SEC announced the creation of a Climate and ESG Task Force, which appears to be a new facet of the Biden Administration’s “whole of government” approach to combatting climate change.  The announcement suggests a period of increased enforcement scrutiny and potential additional requirements regarding ESG disclosures, plans, and investment products.  Companies should be proactive in their efforts to enhance ESG reporting, especially given the potential benefits such reporting can have on financing terms and access to emerging investor classes.

What Will the ESG Task Force’s Mandate Be?

Unlike prior task forces, which focused on particular industries or types of misconduct, the ESG Task Force will focus primarily on a specific type of disclosure.  According to the SEC, the ESG Task Force’s “initial focus will be to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules,” noting that “[c]limate risks and sustainability are critical issues for the investing public and our capital markets.”  The SEC also stated that the ESG Task Force will analyze disclosure and compliance issues relating to “investment advisers and funds’ ESG strategies.”  

The formation of the ESG Task Force is the latest signal from the Biden Administration that it intends to enlist the SEC in its environmental enforcement efforts.  On February 24, 2021, SEC Acting Chair Allison Lee directed the Division of Corporation Finance to review SEC filings for compliance with the SEC’s 2010 climate change disclosure guidance.  And the Division of Examinations included climate related risks and investment adviser ESG disclosures in its 2021 examination priorities.  

What Is the Existing SEC Guidance?

On February 8, 2010, the SEC published interpretative guidance highlighting four climate change risk areas as potential triggers of disclosure requirements:

  • Impact of existing and pending legislation and regulation regarding climate change 
  • Risks and effects of international accords and treaties relating to climate change 
  • The actual or potential indirect consequences due to climate change-related regulatory or business trends, such as increased or decreased demand for products and services
  • Actual and potential material impacts of environmental matters on the business, such as severity of weather, sea levels, arability of farmland, and water availability and quality

Other than a handful of comment letters, the SEC has not taken any significant enforcement action based on climate change disclosures.

What Does this Mean Going Forward?

To date, the majority of litigation surrounding ESG disclosures has come in the form of investor actions and state consumer protection actions, but the vast majority of these plaintiffs have been unsuccessful.  Even state attorneys general, most notably the New York Attorney General, have had decidedly mixed results in enforcement matters based on ESG disclosures.   

Nevertheless, the formation of the ESG Task Force signals that the federal government will now put its weight behind compliance with the 2010 Guidance.  When the Division of Corporation Finance reviews public companies’ filings, it will place added attention on the 2010 Guidance, and, in addition to sending companies comment letters with questions about their climate disclosures, it could refer matters to the ESG Task Force for enforcement.  It is also fair to assume that the ESG Task Force will launch a number of its own investigations.  The ESG Task Force’s work with other agencies could potentially inform new reporting requirements and/or further guidance on disclosures.  And as the effects of climate change become more apparent and global climate change regulations increasingly take effect, the once speculative impacts on financial statements will begin to manifest themselves.  At the same time, banks are increasingly offering favorable terms to companies that have strong ESG reporting, and there is an ever-growing class of ESG-minded investors.  With all that in mind, companies should be proactive and consider the following questions with respect to their ESG disclosures:

  • Have the company’s disclosures adequately accounted for material ESG risks to the company’s financials (i.e. supply chains, logistics, asset classes, or capital expenditures)?
  • Have material ESG risks been identified and included in the enterprise risk management?
  • Has the company appropriately assigned responsibility for continuous assessment and management of ESG risks?
  • What are the appropriate platforms for the company’s ESG disclosures (i.e. the company’s website, corporate responsibility reporting, quarterly analyst calls, or public SEC filings), and are the disclosure consistent across various communication platforms?  
  • What is the company’s exposure when including or excluding ESG information in SEC filings?
  • What disclaimers should the company be using in its disclosures?
  • How is the company measuring and monitoring data that informs ESG disclosures, and what controls are in place to ensure they are accurate?
  • Should the company obtain independent assurance to ensure ESG disclosures are reliable?
  • Are the qualitative and quantitative ESG disclosures investor-grade, and which ESG frameworks and/or standards is the company using?
  • How can ESG compliance be documented and operationalized to access favorable financing and/or attract ESG-minded investor classes and capital markets?
  • Does the Board – especially those executives who are responsible for the company’s disclosures – have the necessary knowledge to oversee ESG risks?


The formation of the ESG Task Force likely foreshadows a series of investigations related to climate change disclosures.  The SEC may also institute new requirements regarding climate change disclosures, and companies are well-advised to be proactive in making such disclosures.  But these new compliance rules should not be viewed as a burden.  Rather, companies can be opportunistic in implementing robust ESG reporting in order to gain favorable financing and attract emerging investor classes that prioritize companies that focus on ESG compliance.



This document has been prepared for general information purposes only and is not intended as legal advice.  If you have any questions regarding the matters covered in this publication, please contact:

Amir Toossi, Partner and Head of Commercial Litigation & White Collar Defense

O: (212) 303-3539 | C: (347) 949-0548 |  

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