As we have noted in many blog posts previously, the US Securities and Exchange Commission has repeatedly indicated its intention to focus more on issues falling under the Environmental, Social, and Governance (ESG) categories. While many of the SEC’s actions have had a strong focus on climate, one of the SEC’s most recent undertakings, an investigation of Activision Blizzard for workplace harassment and discrimination issues, may indicate that matters falling under the “S” tag are ripe for review.
While the SEC is currently working on new disclosure requirements relating to climate and ESG, its recent actions reflect the SEC’s assertion that it has always had authority to pursue actions based on materially misleading disclosures of all types. In March 2021, the SEC announced the creation of a Climate and ESG Task Force that would address “ESG-related misconduct,” however, the SEC has long had authority to pursue companies that have made material misstatements in their disclosures, including those related to climate or, as in this case, employment matters. It has recently exercised this authority in response to potential “greenwashing,” the practice of providing misleading information regarding the sustainability credentials of financial products, on the part of asset managers, and the action against Activision Blizzard demonstrates that it may wield this authority to tackle social issues, as well.
This SEC’s recent activity demonstrates that companies must be vigilant in their reporting of non-financial information that may meet the SEC’s materiality threshold, taking care to ensure that all disclosures are complete and accurate and that they can back up any claims they make relating to environmental or social issues.