The Securities and Exchange Commission (SEC) established the Environmental, Social, and Governance (“ESG”) Task Force in 2021. In March and May of 2022, the SEC proposed a disclosure rule “forcing publicly traded companies to disclose how climate change could threaten their businesses and describe their contributions to global warming.” The rule further accentuates the SEC’s mission “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” However, the proposal has faced substantial opposition, as some believe the proposal exceeds the SEC’s authority.
In the last days of the Trump administration, the Trump Department of Labor (“DOL”) finalized a rule that made it more difficult for socially conscious investments to be included in retirement plans. The Trump-era rule discouraged employer 401(k) and other retirement plans from offering funds from managers that consider Environmental, Social and Governance (“ESG”) factors over investment returns or risk in their due diligence. Despite this, ESG funds continue to gain in popularity, and the new Biden administration has stated that it will not enforce the Trump-era rule as it considers reversing it.