Page 18 - Investment Advisor May 2021

ESG HORIZONS

By Bernice Napach

The SEC Wants Your Input on Climate

Change Disclosure Rules

“Climate and ESG are front and center for the SEC,” says agency

commissioner Allison Herren Lee.
C ommissioner and then Acting staff to develop proposals for revising

Exchange
the agency’s no-action process when
Securities
and
Commission Chair Allison
posals, and to potentially revise Rule
Herren Lee issued a public statement in companies disallow shareholder pro-
March asking investors, SEC-registered 14a-8, which was amended in September
companies, and other market partici- 2020 to require larger holdings and/or
pants for input on the agency’s review longer holding periods for the sponsors
of corporate disclosure requirements of shareholder proposals.
concerning climate change. She said the agency was currently
Lee asked respondents to consider 15 working toward “enhanced transparency
questions, including: around proxy voting,” but should also con-
• How can the commission best regu- sider additional steps such as ESG-specific
late climate change disclosures to pro- policy and procedure requirements.
vide more consistent, comparable, and will initially focus on any material gaps Lee noted the SEC is “committed to
reliable information for investors, while or misstatements in issuers’ disclosure close regulatory cooperation” on climate
also providing greater clarity to compa- of climate risks under current rules. The risk and ESG issues domestically and
nies on what is expected of them? agency also announced that climate- internationally “because the risks and
• Should disclosures be included in related risks will be among the priorities opportunities related to climate and ESG
annual reports, other periodic filings, or of its Division of Examinations for 2021. cut across all manner of boundaries.”
otherwise be furnished? In a March speech, Lee said the agen- The SEC also launched a new page on
• What information related to climate cy should consider “the broader array of its website that brings together agency
risks can be quantified and measured? ESG disclosure issues” beyond climate initiatives on ESG issues. Included on
• What are the advantages and disad- change, including disclosure of specific the site are the SEC’s request for comment
vantages of rules that draw on existing metrics on workforce diversity and polit- on whether current disclosures by public
frameworks, such as those developed ical spending. companies on climate issues are adequate
by the Task Force on Climate-Related “Research shows that many companies and how they can be improved, its plan
Financial Disclosures, the Sustainability that have made carbon-neutral pledges, for the Division of Corporation Finance
Accounting Standards Board, or the or otherwise stated they support climate- to review 2010 guidance on disclosure
Climate Disclosure Standards Board? friendly initiatives, have donated sub- requirements related to climate change
She encouraged commenters to sub- stantial sums to candidates with climate and the agency’s 2021 examinations pri-
mit empirical data and other informa- voting records inconsistent with such orities, which include a greater focus on
tion in support of their comments. assertions,” said Lee. “Political spending climate-related risks.
In Febuary, she directed staff to review disclosure is key to any discussion of sus- How the SEC ultimately decides to
companies’ compliance with the agency’s tainability.” She noted, however, that the change its regulations on ESG and cli-
2010 disclosure guidance for climate SEC is barred from finalizing a rule about mate-related issues depends largely on the
change as a first step in developing a more corporations’ political spending by the positions that Gary Gensler, the expected
comprehensive framework for climate- 2021 Consolidated Appropriations Act incoming chairman, whose nomination was
related disclosures. that Congress passed in December 2020. to be voted on by the Senate in April. Andrew Harrer/Bloomberg
In early March, the agency announced
the creation of a Climate and ESG Task SHAREHOLDER PROPOSAL RULES Bernice Napach can be reached at
Force in its Division of Enforcement that Lee also said she has asked the SEC [email protected].

16 INVESTMENT ADVISOR MAY 2021 | ThinkAdvisor.com