In a batch of letters to the U.S. Securities and Exchange Commission, businesses have pushed back against efforts to make them disclose their environmental impact and stances on public policy matters.
As part of a 340-page report released in April, the SEC asked for public comments on how to modernize Regulation S-K, the rule that serves as the framework for how SEC-regulated companies disclose much of their business and financial information.
One question raised by the SEC is whether companies should be required to make so-called environmental, social and governance (ESG) disclosures.
In a letter sent to the agency on July 20, the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness harshly criticized the push for ESG disclosures, arguing that requiring more of this information from companies would exceed the materiality standards for disclosure set by federal securities laws.
“The objective of many calling for new public company ESG disclosures is primarily to obtain some social impact or achieve a political goal,” the chamber wrote. “These goals, if met, would in many cases contribute to an environment that makes it more difficult for businesses to innovate, compete and grow.”
Some companies had comments of their own. Christine Richards, general counsel and secretary at FedEx Corp., wrote that she agreed with the chamber and added that new ESG disclosures are “inappropriate and unnecessary.”
“ESG issues are often prompted by or relevant to only a small subset of investors or other stakeholders,” Richards wrote. “While reporting companies should remain free to disclose ESG information on a voluntary basis (as FedEx does), disclosure of such information should continue to be based on a traditional materiality standard and not mandated.”
There were plenty of commenters on the other side of the argument who argued that SEC filings are the appropriate place for companies to give investors data about their environmental impact and where they stand on social and political issues.
Among those who share this view are former Treasury secretaries Henry Paulson, Robert Rubin and George Schultz, who commented on behalf of the Risky Business Project, a Paulson-chaired group that works on environmental issues.
The former Treasury chiefs said that climate change is a material risk under the Securities and Exchange Act, but that most companies disclose information about this risk “poorly, if at all.”
“If investors are to effectively evaluate climate risk, they need a far better understanding of granular, industry-specific climate impacts, with industry-specific standards by which to evaluate corporate performance on these issues,” the comment said.
A group of asset owners and managers under the umbrella of Ceres, an organization that advocates for a sustainable global economy, also supported more sustainability disclosure, explaining that they need this data “to make informed investment and proxy voting decisions.”
“We recommend that the SEC approach sustainability disclosure as it would any other disclosure issue,” the group wrote.
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