"The published priorities are not exhaustive and will not be the only issues addressed in FY24 examinations," an SEC spokesperson said in an email.
And according to industry experts, the move does not mean that the SEC will suddenly halt its oversight of ESG investing.
ESG has been a key focus in the SEC's examination programs for a number of years, according to Carlo di Florio, global advisory leader at ACA Group, a governance, risk and compliance adviser in financial services.
Di Florio — former director of the SEC's office of compliance inspections and examinations, now renamed the division of examinations — pointed out that the SEC released a risk alert in April 2021, warning of misleading marketing and highlighting best practices with regard to ESG products and services.
"That (risk alert) is still in place, and I think that's still a very good document for any firm to kind of understand the SEC's thinking on this," added Bryan McGannon, managing director of US SIF: The Sustainable Investment Forum, a nonprofit organization whose members represent $5 trillion in assets under management.
McGannon also said the SEC's task force on climate and ESG issues, which it launched in March 2021, will continue to do its work, and "I think (that's) primarily how they will continue to oversee ESG."
ESG has been a "growing priority for the rule-making agenda at the SEC," di Florio said. Just last month, the agency finalized its updated Names Rule, which will expand its 80% investment requirement to fund names suggesting the fund incorporates ESG factors.
The SEC is expected to soon finalize a rule proposal that would require fund managers and investment advisers to disclose more information on ESG strategies in their fund prospectuses, annual reports and adviser brochures. Also, industry groups are awaiting a final version of the contentious rule proposal that would require public companies to disclose a host of climate-related information in their registration statements and periodic reports.
"If you take all of that in its totality, I think that (the SEC) is just pointing out that (ESG is) not going to be one of the new areas of focus, but it certainly will continue to be a focus," di Florio said. "I don't read it as they're not going to look at ESG at all in '24."
Steven M. Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, pointed to the rule-makings as well, adding, "I wouldn't look at this document in isolation."
Looking ahead, di Florio said while the SEC will continue to focus on ESG, "They may not add as many of the resources that they've added over the past few years, because they've already done that body of work, and they've already sent those signals to the industry."
The exclusion of ESG is "notable" since the SEC included it as a priority in past years, di Florio said, but "it's also notable because it's become a politicized issue."