The Securities and Exchange Commission (SEC) threw down the gauntlet after President Biden’s election and asserted its interest in greater regulation and policing of environmental, social, and governance (ESG) issues. One aspect of this initiative - the possibility of mandatory disclosure rules for all issuers - has reignited significant debate about the SEC’s role and the nature of the potential disclosures, including whether the SEC has the authority to mandate such disclosures if ESG issues are not material to a specific issuer. These debates have received significant attention and will likely take time to resolve.

This client alert addresses the SEC’s focus on the burgeoning sector of investment products focused specifically on their ESG attributes - a sector estimated to include 800 registered investment companies with more than $3 trillion in assets. Simply put, this is an area where we expect enforcement attention from the SEC in the near term. Policing ESG investment products is likely to be an SEC priority under the umbrella of its mandate to police disclosure, given the sector’s substantial growth and the priority the SEC has announced it will place on ESG issues generally.