While the SEC staff tends to be of the broad view that ESG warrants serious consideration, there are a breadth of different opinions regarding what ultimate disclosure requirements should look like.  This discord came to a head during a virtual SEC panel last Friday.

The panelists included both SEC staff and industry leaders.  One-by-one, the panelists provided their views on the SEC’s ESG subcommittee’s December recommendation of new standards for issuers to disclose “material ESG risks.”  In particular, the ESG subcommittee recommended that material ESG risks be disclosed pursuant to “standard setters’ frameworks,” and “in a manner consistent with the presentation of other financial disclosures.”

The views expressed in response to the subcommittee’s recommendation fell into two main camps.  Acting SEC Chair Allison Herren Lee continued her calls for “consistent, comparable and reliable issuer disclosure[s],” while Commissioner Hester M. Peirce explained that, in her view, “issuers already have to disclose material risks” and that undermining that framework “to accommodate ESG will harm investors.”

Industry executives had their own opinions, aligning more often with Acting Chair Lee than Commissioner Pierce.  Namely, certain executives argued in favor of a new framework accommodating climate change and other ESG considerations linked to investor demands and ultimate investment returns.  To that end, Blackrock, the largest asset manager in the world, plans to have $1.2 trillion in ESG assets in the next 10 years.  However, some industry representatives urged against ESG-specific disclosure requirements.  An executive from an insurance company noted her view that ESG is dominated by a “broad variety of special interest groups to advance interests unrelated to shareholder value,” and the materiality standard for public statements sufficiently captures ESG considerations.

No matter who you side with, the polarization in Friday’s panel shows there will be no easy road to a final regulatory scheme.  To stay up-to-date on the ongoing ESG debate, subscribe to Proskauer’s Corporate Defense and Disputes blog and we will keep you appraised of the latest developments.

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Photo of Erica T. Jones Erica T. Jones

Erica Jones is an associate in the firm’s Litigation Department, where her practice encompasses a range of business, regulatory, and corporate governance matters. She has worked extensively in defense of securities class actions, derivative suits, and white collar criminal matters involving investigations by…

Erica Jones is an associate in the firm’s Litigation Department, where her practice encompasses a range of business, regulatory, and corporate governance matters. She has worked extensively in defense of securities class actions, derivative suits, and white collar criminal matters involving investigations by the SEC, DOJ, and state attorneys’ offices. In addition, Erica has advised on antitrust matters involving allegations of price fixing, restraint of supply, monopolization, group boycott, bid rigging, and collusion across industries that include agriculture and health care. She is also a member of the litigation team representing the Financial Oversight and Management Board in the Commonwealth of Puerto Rico’s bankruptcy proceedings.

Erica maintains an active, diverse pro bono practice, with a focus on immigration law, compassionate release and habeas corpus, and racial justice. She is an associate trustee with the Washington Lawyers’ Committee for Civil Rights and Urban Affairs and has been recognized by the District of Columbia Courts’ Capital Pro Bono Honor Roll. Erica was also one of a few women selected to be a Protégée for Proskauer’s Women Sponsorship Program, an initiative for high performing midlevel lawyers that champions emerging leaders.

Erica strives to stay on the cutting edge of developing areas of law through her membership in Proskauer’s COVID-19 Task Force, ESG Working Group, and Private Credit Litigation Group.  Erica’s ability to advocate for her clients is further bolstered by her recent Master’s Degree in Accounting from the University of North Carolina’s Kenan-Flagler Business School with a concentration in Financial Reporting and Analysis.

Prior to joining Proskauer, Erica was an intern with the Department of Justice in the Constitutional and Specialized Tort Litigation Section. Outside of her career in the law, Erica has been featured on Fox’s So You Think You Can Dance, teaching ballroom dance to students at Lighthouse for the Blind.