Hanging over the effort are the November elections, with control of both the White House and Congress up in the air. Republican presidential candidates Donald Trump, the party’s front-runner, and Ron DeSantis have railed against ESG policies, calling them “radical-left garbage” and “ideological joyrides,” respectively. The president nominates the heads of the SEC and other top Washington regulators.

“It’s not the SEC’s job to be thinking about the political factors at play, but of course Republicans in Congress have not hidden the fact that they want to erase much of the Biden administration’s regulatory agenda,” the Sierra Club’s Cushing said.

Democratic Discord
Another complication is the long-standing lack of internal consensus among the agency’s Democrats on how to finalize the package of climate risk disclosure rules. The SEC has stayed tight-lipped about whether public companies will have to disclose Scope 3 emissions, as proposed.

Many corporations report their own pollution, but industry groups have balked at doing the same for their suppliers’ and customers’ emissions. Companies such as Exxon Mobil Corp. and Walmart Inc. have called for the Scope 3 mandate to be scrapped from the final rule.

In the past 21 months, agency staff, commissioners’ offices, climate activists and powerful trade associations have met dozens of times on the rule, with no clear resolution.

As the SEC proposals have lingered, other authorities have plowed ahead on climate disclosure rules. Thousands of US companies will fall under robust California mandates enacted this year and European Union regulations that went into effect in January.

“This is an SEC that came in with a lot of energy and moved quick at the start,” said Allison Handy, a partner at the law firm Perkins Coie who represents public companies. “I’m hopeful that we’re seeing the current commission learn from moving too fast. They’re taking the time to create something that could survive.”

Task Force
Meanwhile, the agency’s efforts to scrutinize corporate America’s climate and ESG claims appear to have slipped to the back burner. The SEC removed ESG as a focus of its examination staff for 2024. It had been a priority in 2021, 2022 and 2023.

Allison Lee, the SEC’s former acting chair, made a splash in early 2021 by announcing a 22-person task force of enforcement staff to find and prosecute ESG-related misconduct. Since then, the task force has brought four cases on alleged climate-related misconduct. Several others were filed on social or governance grounds.

In three of the enforcement cases, the SEC alleged that investment adviser units at Wall Street banks Goldman Sachs Group Inc., Deutsche Bank AG and Bank of New York Mellon Corp. made improper ESG investment claims or had procedural failures. The firms paid $24.5 million total in fines to settle the probes, and none of the firms admitted to or denied the SEC’s findings.