Environmental, Social and Corporate Governance: What are the Risks, Really?
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Environmental, Social and Corporate Governance: What are the Risks, Really?

Environmental, social and corporate governance (ESG) – like climate change and environmental justice – has been a hot topic of discussion in the early days of the Biden administration. Illustrating the interconnectedness of the trending issues, climate change and environmental justice are pillars of ESG.

The ESG-related activity at the federal government is just getting started. The US Securities and Exchange Commission (SEC) announced the creation of a Climate and ESG Task Force to “develop initiatives to proactively identify ESG-related misconduct” with a focus, in part, on “material gaps or misstatements” in disclosure of “climate risks.” The SEC also raised the concept of developing a universal reporting framework and acting Chair Allison Lee explained that the SEC has “begun to take critical steps toward a comprehensive ESG disclosure framework.” The SEC is also signaling it may “consider the broader array of ESG disclosure issues,” beyond climate change (e.g., workforce diversity). The US Department of Labor (DOL) announced it would not enforce two Trump administration rules that – at least implicitly – could limit investments based on ESG. The DOL explained the rules appeared inconsistent with Executive Order 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis,” and, practically, the DOL had heard “from stakeholders that the rules, and investor confusion about the rules, have already had a chilling effect on appropriate integration of ESG factors in investment decisions.”

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