The political and regulatory landscape in the U.S. has been shifting away from ESG enforcement, reflecting scepticism from investors toward corporate climate initiatives. In September 2024, the U.S. Securities and Exchange Commission (SEC) quietly dissolved its Climate and ESG Enforcement Task Force, signalling a retreat from its once-ambitious ESG agenda. A combination of mounting legal challenges, political opposition, and pushback from industry groups all contributed to this shift. However, while the task force is gone, ESG-related enforcement actions have not disappeared entirely, reflecting that both companies and investors remain vigilant. Here, we take a look at the reasons behind the Task Forces disbandment and what it accomplished during its few short years.

Background and Creation of the ESG Task Force

The Task Force was established in March 2021 under acting SEC Chair Allison Herren Lee, with the goal of identifying ESG-related misconduct and ensuring corporate disclosures on climate risks were accurate. It was a key component of the SEC’s broader efforts to increase transparency around how public companies, investment funds, and registered advisers addressed ESG issues.

Further climate-related disclosure rules, requiring companies to report their greenhouse gas emissions and climate risks were introduced under SEC Chair Gary Gensler. These proposals, however, quickly faced legal challenges from industry groups and multiple states, delaying their implementation.

Why the Task Force Was Disbanded

The SEC’s ESG agenda faced significant resistance, both in the courts and from industry leaders. Critics argued the agency was overstepping its authority, and legal battles slowed and, in some instances, blocked the implementation of the new rules. The SEC’s climate disclosure rule, adopted in March of 2024, was immediately challenged in court, leading the agency to pause its implementation while the case was being reviewed.

Despite these setbacks, the SEC continued to pursue other ESG-related initiatives, including its Nasdaq corporate board diversity rule—which required listed companies to disclose board diversity data or explain why they do not meet the requirements. The rule which has now been deemed ineffective, was reviewed by the U.S. Court of Appeals for the Fifth Circuit after legal opposition.

With all this opposition, the writing was on the wall for the Task Force, and in September 2024 it was closed down.

Ongoing ESG Enforcement Actions

Although the Task Force is gone, investors should be aware that ESG is not off the cards at the SEC. It continues to remain active in enforcing ESG-related regulations, with recent enforcement actions including:

• Vale SA – The Brazilian mining company faced $55.9 million in penalties after misleading investors about the safety of its dams, which later collapsed, killing hundreds.
• Goldman Sachs & DWS – Both financial firms were fined for failing to implement and follow their ESG policies when promoting ESG investment funds. Goldman Sachs paid $4 million, while DWS, a Deutsche Bank subsidiary, paid $19 million.
• Keurig Dr. Pepper – The SEC fined Keurig $1.5 million for falsely claiming its K-Cups were recyclable, despite feedback from recycling firms stating otherwise.

What’s Next for ESG Regulation?

The SEC’s decision to disband the ESG Task is a shift in strategy. Instead of a dedicated task force, ESG-related investigations are now to be incorporated into broader financial regulation efforts.

Additionally, the SEC’s fund names rule, which took effect in December 2023, provides another enforcement avenue. This rule requires investment funds with ESG or sustainability-focused names to ensure that at least 80% of their assets align with their stated investment strategy.

With the merging of its ESG focus into its wider remit, it’s important not to become complacent. Companies must remain vigilant in ensuring that their ESG-related disclosures are accurate, transparent, and well-substantiated, or risk potential enforcement actions in the future.

The task force may be dead, but ESG is still very much alive and kicking at the SEC.

Written by Aidan Graver from Cantor L&P’s Charities Team