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SEC Disbands Climate & ESG Task Force
Tim Mohin
20 Sep
The SEC’s beleaguered ESG agenda took another hit this week as their Enforcement Division’s Climate & ESG Task Force, set up three years ago, was quietly disbanded.
The group was created in March 2021 to “develop initiatives to proactively identify ESG-related misconduct.” Since then, the group has played a pivotal role in some of the SEC’s biggest ESG-related fines, like their biggest ones against Deutsche Bank ($25 million) and Goldman Sachs ($4 million) for misleading ESG fund claims. The SEC now claims that “the expertise developed by the task force now resides across the Division.”
This move is another signal of SEC’s gradual retreat from its ESG agenda as scrutiny and lawsuits grow from the conservative-led ESG backlash. ESG was removed from the SEC’s list of 2024 policy priorities after featuring as a priority every year from 2020 - 2023. And just last week, we shared how SEC Chair Gary Gensler’s ESG proposals have been stalled as the election - and possibly the end of his tenure - draws near.
As if to show that the SEC still has some ESG “teeth,” last week, the SEC fined Keurig Dr Pepper $1.5 million for misleading claims. They said in their 2019 and 2020 annual reports that their coffee pods could be recycled, but recycling companies said they would not accept them. John Dugan of the SEC said, “Public companies must ensure that the reports they file with the SEC are complete and accurate. When a company speaks to an issue in its annual report, they are required to provide information necessary for investors to get the full picture on that issue so that investors can make educated investment decisions.”
Although the importance of ESG has been diminished for now, Dugan’s comments speak to why the SEC will always return to these issues - it’s information investors need to make better decisions.
Election to Determine The Future of Climate Action
The speed at which the SEC returns to ESG and the broader future of climate and sustainability action will be largely determined by the election this year. That is the view of both climate scientists and activists alike. Al Gore said, “Most climate activists that I know in the United States believe that the single most important near-term decision America can make with regard to climate is who is the next president.”
Although former Vice President Gore said that the energy transition is now locked in and can’t be stopped, it is the slow down of pace that he is worried about, saying: “The direction of travel for the world as a whole, for the global economy, is now set… The remaining question is how fast this transition can occur.”
In agreement with Gore, leading climate scientist Johan Rockström said, “If Trump comes into power, there will be a destruction of the IRA, and we will lose pace. It will mean that the signal to the world is, at best, another four years of pause on the action.” Rockström’s comments come as he and a team of 65 scientists released a study that shows the Earth's “safe and just” boundaries are being pushed. The study published last week in the Lancet journal was the first to quantify the minimum access to the natural resources required for humans to live a life free of poverty.
EUDR Delay Requests Escalate
The European Union Deforestation Regulation (EUDR) requires that companies importing deforestation-linked goods, (e.g., cattle, soy, palm oil, coffee, cocoa) into the EU will have to prove those goods are not linked deforestation starting Dec 30th, 2024. However, a growing chorus of EU and non-EU countries are asking for the directive to be postponed.
“There will be chaos if implemented,” said Eddy Martono of the Indonesian Palm Oil Association. The most common argument is the lack of clear information and tools for determining whether deforestation took place on land linked to products.
German Chancellor Olaf Scholz also asked “that the regulation be suspended until the open questions… have been clarified.” Brazilian ministers have also attacked the rule, saying it could reduce exports to the EU by $15 billion and hurt mainly small-scale farmers.
Despite the growing voices asking for a delay of the EUDR, activists warn that any postponement will result in more emissions and deforestation. Brazilian non-profit Climate Observatory claims delaying the rule “will ultimately harm Brazilian agribusiness” and that it “does not create unachievable technical challenges, but builds on already established transparency frameworks.”
Climate Lawsuits Exploding
Climate in the courts has been a recurring theme this year. According to a new report, at least 86 climate cases have been brought against oil and gas companies, with the majority coming after the 2015 Paris Agreement.
The three main categories are:
Compensation for climate damages,
Misleading claims, and
Failure to reduce emissions.
Cases arguing for compensation are growing the fastest as “attribution science” enables prosecutors to “link specific extreme weather events to climate change with greater accuracy,” said Noah Walker-Crawford of the London School of Economics.
Criminal charges are also on the rise, with some lawyers now arguing that fossil fuel companies can now be charged with homicide after decades of misinformation campaigns. The first of these started earlier in the year in France when NGOs filed a criminal charge against the CEO and directors of the French oil company TotalEnergies for contributing to climate-related deaths.
Brazil On Fire
We just experienced the hottest August ever, the 14th record-breaking month out of the last 15, and the repercussions of an extended period of heat are reaping havoc on global systems. With widespread flooding in Europe, Africa, and Asia.
However, Brazil is where the biggest impact is being felt right now. An unprecedented drought, coupled with extreme heat and winds, has made for a perfect storm for wildfires. Fragmented wildfires across the Amazon, Pantanal, and Atlantic Rainforest burned an area the size of Costa Rica in August alone and blackened the skies of major South American cities.
As Brazil comes to grips with its climate-attributed disasters, this deep dive from FT looks at how Brazil’s President Lula is trying to balance exploiting the nation's huge fossil fuel extraction potential with its ambitions to be a climate leader.
NY Climate Week
NY Climate Week starts on Monday. The event seems to grow every year and is especially important this year.
Highlighting two events my company, BCG, is hosting that may be of interest to our readers:
On September 25th at 1:30-3, I will join a panel discussing the use of ESG in the C-suite. Register here.
On September 26th at 10-12, I will moderate a discussion with the European Sustainability Standards Board Chair Patrick De Cambourg to unveil Europe’s new Implementation Guidance for Climate Transition Plans. Register Here
There are only a few seats left for these sessions, and the organizers will confirm registrations.
As well as hosting events, BCG has made a series of announcements ahead of the event that will drive great discussion, some of which include:
A new report in collaboration with CO2 AI shows that decarbonization can bring substantial financial gains to companies, but few are capitalizing.
BCG’s Supply Chain Navigator tool will help companies identify, prevent, and address ESG risks in their supply chain to prepare for compliance with the Corporate Sustainability Due Diligence Directive (CS3D).
I look forward to connecting with old friends and making some new ones at this year’s event.
The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.
Other Notable News:
Climate change caused a year-long seismic mystery. After a year of investigation, the unknown seismic object (USO) was found to be a massive ice landslide into a Greenland fjord, which caused a tsunami that sloshed around the fjord for nine days.
The leader of the EU’s clean energy transition will be Spanish environmentalist Teresa Ribera. She has been tasked with ensuring the EU meets The Green Deal while maintaining growth and reducing the risks of further farmer protests.
The EU cut emissions by 32.55% since 1990 despite the economy growing by 67%.
A new survey finds that 85% of companies increased their sustainability spend last year.
The Hague in the Netherlands is set to become the first city to ban fossil fuel advertising. The ban will apply to public advertising and will apply to air travel, cruises, and other emissions-intensive ads.
Notable Podcasts:
In this week’s episode of the Outrage and Optimism podcast, the hosts Christiana Figueres, Tom Rivett-Carnac, and Paul Dickinson discuss another climate record beating in August, the UK’s last coal planet, and interview Marine Biologist and climate writer and activist Dr. Ayana Elizabeth Johnson, to discuss ocean-based solutions for the climate crisis.
In this week’s episode of the Harvard Business Review’s The Climate Rising podcast, the second in their climate storytelling series, they look at Netflix’s strategy for telling climate stories. The episode features an interview with Netflix CSO Emma Stewart, as she discusses the company’s approach to sustainability and how it supports creators looking to tell sustainability stories.
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