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ESG Cases Remain Enforcement Priority at SEC, Top Official Says

Nov. 4, 2022, 4:22 PM

The SEC remains committed to rooting out wrongdoing by companies and investment funds that mislead investors about environmental, social and governance issues, a senior agency official said Friday.

The Securities and Exchange Commission will continue to file enforcement lawsuits while it works to issue tougher rules to police climate disclosures and other ESG reporting, said Gurbir Grewal, the agency’s Enforcement Division director.

The SEC’s Climate and ESG Task Force has helped with at least three cases involving misleading corporate statements and claims since it was formed in 2021. The matters include enforcement actions against Bank of New York Mellon Corp., health insurance distributor Benefytt Technologies Inc. and Brazilian mining company Vale S.A.

“It’s an important area for us because it’s important for investors,” Grewal said at a Practising Law Institute securities conference.

The level of ESG enforcement since the task force started by then-SEC Acting Chair Allison Lee and continued under Char Gary Gensler is unclear. An agency website on the task force lists six cases as examples of ESG matters since it was created in March 2021, though only three have press releases that credit the enforcement group.

An SEC order in July concerning the Benefytt case—in which the SEC alleged the company made misleading statements to consumers about health insurance products—also didn’t mention ESG, but a press release said the task force assisted.

The first case tied to the task force was the matter against Vale, which the SEC said in April deceived investors about the safety of its dams before one collapsed in 2019. The case is pending in the U.S. District Court for the Eastern District of New York.

BNY Mellon in May then reached a $1.5 million settlement with the SEC over alleged ESG misstatements concerning its mutual funds. Benefytt and its former CEO, Gavin Southwell, in July also agreed to pay more than $12 million over claims they hid tens of thousands of consumer complaints from investors.

Lee directed the task force to deploy existing rules to bring cases against companies that mislead investors about their climate risks or engage in other ESG-related misconduct when she launched it with 22 members. The SEC is working on finalizing rules that are intended to fight ESG fund greenwashing and would require companies to disclose how climate change affects their businesses.

“We’re not waiting for new rules here,” Grewal said. “What we’re doing is we’re using our existing rule set to hold issuers accountable.”

To contact the reporter on this story: Andrew Ramonas in New York at aramonas@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; Michael Ferullo at mferullo@bloomberglaw.com