March 26, 2021
Following the announcement of an ESG task force, SEC Acting Chair Allison Lee has signaled rapid developments on several ESG issues, including potential climate and other disclosures prompting pushback from Senate Republicans.
The 2-2 split on the Commission effectively halts new rules. Republicans will look to avoid major changes as long as possible, especially as Senate Democrats have called on the SEC to draft new rules regarding lobbying and political donations disclosures.
Republicans are beginning to push back on the emerging financial regulatory agenda. Senator Pat Toomey (R-PA), ranking member of the Senate Banking Committee, wants a briefing about the agency’s newly created climate and ESG enforcement task force by April 5, 2021. The SEC “should not use enforcement actions as a back door for imposing new regulations on ESG and climate change issues,” the senator wrote in a letter to Ms. Lee. He emphasized that the “changes would be premature” given that Mr. Gensler has not been confirmed. Further, Sen. Toomey has requested additional information regarding the potential for mandatory corporate disclosures on a range of issues, including political donations.
Acting Chair Lee has quickly implemented several initiatives:
Outlook: Mr. Gensler is not likely to unwind recent actions once confirmed, although he has only broadly acknowledged that he believes enhanced disclosures would benefit investors. Nor is it likely that Ms. Lee’s actions would meaningfully hinder Mr. Gensler’s confirmation prospects. However, he may seek to moderate the pace or address other concerns such as price volatility, cryptocurrencies, and the rise of special purpose acquisition companies (SPACs)/blank-check IPOs.