Last week, the U.S. Securities and Exchange Commission proposed a set of sweeping new rules requiring public companies to disclose climate-related risks in their registration statements and periodic reports. Under the proposed rules, public companies would have to disclose the actual and potential impacts of climate change on their business,
The SEC’s Climate and ESG Task Force has been criticized by Republican commissioners who believe enforcement in the area would be premature. But Kelly L. Gibson, acting deputy director of the enforcement and head of the agency-wide ESG Task Force, stated that the task force is necessary to recognize evolving investor priorities and that it will continue to operate. And new SEC Chairman Gary Gensler has echoed her sentiments, telling Congress that investors “measured in the trillions of dollars” seek to better understand climate risk issues.
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.”
On February 18, 2021, the Institute of International Finance (“IFF”) hosted the U.S. Climate Finance Summit, at which both John Coates, Acting Director of the SEC’s Division of Corporation Finance, and Federal Reserve Governor Lael Brainard made statements in favor of companies providing fulsome ESG disclosures. These pronouncements underscore the Summit’s larger goal of supporting a “pro-growth, pro-markets transition to a sustainable, low-carbon economy.”