It has been publicly reported that the Dallas office of the SEC is currently engaged in an investigation of ESG disclosures by companies doing business with state government entities in Texas.  Specifically, the SEC is "scrutinizing potential conflicts between what the underwriters have told investors versus Texas regulators about their policies on doing business with gunmakers and fossil fuel companies."  This investigation appears to stem from a recent Texas law that prohibits companies doing business with Texas state governmental entities from discriminating against firearms or fossil fuel companies.  The SEC appears to be concerned about how companies may have acted in ways inconsistent with their ESG disclosures when complying with that Texas state law.    

Although this enforcement activity is perhaps not the precise type that was anticipated when the SEC announced a focus on ESG issues--as both companies and the private bar thought that SEC enforcement actions would be directed against failures to comply with ESG disclosure standards articulated by the SEC--this type of enforcement activity, centering on potential inconsistencies between information disclosed to different types of recipients, is squarely within the SEC's remit.  

Further, this enforcement activity suggests that private companies may increasingly be caught between state level ESG regulations propounded by one party and federal ESG regulations propounded by another, leading to numerous complications and compliance problems.  Additionally, this development previews the regulatory conflicts that can arise when powerful industries seek political protection from ESG disclosure requirements that threaten their business, especially their access to financing.