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Portfolio > Portfolio Construction > ESG

The SEC Wants Your Input on Climate Change Disclosure Rules

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What You Need to Know

  • “Climate and ESG are front and center for the SEC,” SEC Acting Chair Allison Herren Lee says.
  • The comments will be considered in the agency's review of corporate disclosure requirements for climate change.
  • As acting chair, Lee has taken several ESG-related steps.

Acting Securities and Exchange Commission (SEC) Chair Allison Herren Lee issued a public statement Monday asking investors, SEC-registered companies, and other market participants for input on the agency’s review of corporate disclosure requirements concerning climate change.

Lee asked respondents to consider 15 questions, including:

  • How can the commission best regulate climate change disclosures to provide more consistent, comparable, and reliable information for investors, while also providing greater clarity to companies on what is expected of them?
  • Should disclosures be included in annual reports, other periodic filings, or otherwise be furnished?
  • What information related to climate risks can be quantified and measured?
  • What are the advantages and disadvantages of rules that draw on existing frameworks, such as those developed by the Task Force on Climate-Related Financial Disclosures (TCFD), the Sustainability Accounting Standards Board (SASB), or the Climate Disclosure Standards Board (CDSB)?

She encouraged commenters to submit empirical data and other information in support of their comments.

Just three weeks ago, the acting SEC chair directed staff to review companies’ compliance with the agency’s 2010 disclosure guidance for climate change as a first step in developing a more comprehensive framework for climate-related disclosures.

In early March, the agency announced the creation of a Climate and ESG Task Force in its Division of Enforcement that will initially focus on any material gaps or misstatements in issuers’ disclosure of climate risks under current rules. The agency also announced that climate-related risks will be among the priorities of its Division of Examinations for 2021.

“Climate and ESG [environmental, social, and corporate governance issues] are front and center for the SEC,” Lee said in a speech before the Center for American Progress on Monday, in which she referenced her call for public input on climate change disclosure. “We are taking a holistic look at all of the ways climate and ESG intersect with our regulatory framework, and moving ahead with efforts across our offices and division to account for that … and we are actively laying the groundwork for more progress to come.”

In early February, Lee created the new position of Senior Policy Advisor for Climate and ESG, reporting to her office, and appointed former SEC senior counsel Satyam Khanna to the role.

In her speech on Monday, the acting SEC chair said the agency should consider “the broader array of ESG disclosure issues” beyond climate change, including disclosure of specific metrics on workforce diversity and political spending.

“Research shows that many companies that have made carbon-neutral pledges, or otherwise stated they support climate-friendly initiatives, have donated substantial sums to candidates with climate voting records inconsistent with such assertions,” said Lee. “Political spending disclosure is key to any discussion of sustainability.” She noted, however, that the SEC is barred from finalizing a rule about corporations’ political spending by the 2021 Consolidated Appropriations Act that Congress passed in December 2020.

Staff to Consider Revising Shareholder Proposal Rules

Lee also said she has asked the SEC staff to develop proposals for revising the agency’s no-action process when companies disallow shareholder proposals, and to potentially revise Rule 14a-8, which was amended in September 2020 to require larger holdings and/or longer holding periods for the sponsors of shareholder proposals.

She said the agency was currently working toward “enhanced transparency around proxy voting,” but should also consider additional steps such as ESG-specific policy and procedure requirements.

Lee noted the SEC is “committed to close regulatory cooperation” on climate risk and ESG issues domestically and internationally “because the risks and opportunities related to climate and ESG cut across all manner of boundaries.” She closed her speech by acknowledging that climate change and ESG “are fundamentally about protecting everyday investors.”


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