The SEC’s New Look at ESG

Climate and the environmental health of planet Earth are among humanity's most important challenges. Receiving a new head in 2021, the SEC has revised its list of priorities for the near future and announced. The organization announced that the focus will be on climate issues and ESG.

This is not the first year that the U.S. Securities and Exchange Commission has raised concerns about the risks faced by investors and businesses that are related to climate issues. The agency has emphasized that it is incorrect to call ESG funds "green," as the wealth management industry

ESG, that is environmental, social and corporate governance, represents a list of management characteristics of a company that takes part in solving environmental, social and governance problems.

The SEC’s New Look at ESG review

Before deciding to invest in this or that company, more and more investors consider its environmental and social impact. I.e., investors, based on a number of criteria, can evaluate a potential investment. For example:

  • Environmental criteria allow for an assessment of whether a company meets its status as a steward of nature.
  • According to Social criteria, the interaction of such companies with natural and legal persons, communities (customers, partners, employees, suppliers), which are also involved in this area, is monitored.

Moreover, they supervise the company management, internal control services, shareholder rights and audit, and executive compensation issues.

SEC on Climate and Environmental Issues: Changes, Plans, Accents

The SEC ranks among the most influential financial regulators in the world. In the first quarter of 2021 alone, even in the face of a global pandemic, the agency has managed to do some serious work on the planet's climate and environment, setting new high standards. AP Joe Biden entrusted Gary Gensler to lead the SEC and he immediately outlined a vector for the Agency's work. The priority is the following:

  • a tougher oversight of environmental and climate work;
  • an increased focus on ESG, continuing the course begun by Alison Herren Lee (former Acting Chair of the Agency).

In late winter 2021, the agency released a fact list on environmental, governance and social funds for investors and business people, outlining the innovations in the field.

The SEC intends to protect the interests of investors and help minimize the physical risks associated with climate change.

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