Biden's SEC Pick Likely to Take a Closer Look at ESG | ETF Trends

As president-elect Joe Biden looks to fill out his cabinet, the pick for the chair of the Securities and Exchange Commission (SEC) could make oversight of socially responsible investments a priority.

“I wouldn’t be surprised to see the next chairman or chairwoman take a hard look at the commission’s approach to ESG — or environmental, social and governance issues — especially those focused on climate risk,” Caroline Crenshaw, who holds a Democratic commission seat, told at an online conference hosted by the McDonough School of Business at Georgetown University, InvestmentNews reports.

Current SEC Chairman Jay Clayton will be leaving the agency by the end of year. Consequently, Biden will have to choose the next permanent SEC chief, whom will give the five-person panel a Democratic majority.

Democratic lawmakers have been pushing the SEC to take up climate change. Senator Elizabeth Warren, D-Mass., recently got into a dispute with Clayton over corporate reporting on standards for climate risk.

“We need a new SEC chair who will put this climate crisis at the top of the agency’s agenda,” Warren said.

The SEC has been scrutinizing investment advisers’ disclosures over their ESG strategies as a growing number of observers voiced concerns over “Green Washing,” or just calling their products socially responsible without strict guidelines prove them otherwise.

Last month, the Department of Labor released a final rule that would require retirement plan fiduciaries to justify ESG investments as strategies that enhance the overall portfolio and not just provide a do-good investment exposure.

There is an increasing number of voices calling for clearer standards on ESG and socially responsible investments. Elad Roisman, who holds a Republican SEC seat, believes ESG will be central to the agency’s deliberations next year.

“It’s a conversation that I think is going to be ongoing,” Roisman said at the Georgetown conference. “It’s one I can’t imagine we’re not going to have for the foreseeable future.”

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