At an Asset Management Advisory Committee ("AMAC") meeting, SEC officials considered a subcommittee's proposed recommendations on environmental, social, and governance ("ESG") disclosure.

Division of Investment Management Director Dalia Blass questioned whether it is appropriate to recommend different issuer disclosures for ESG material risks than for other potential areas of risk. In relation to the ESG Subcommittee's disclosure recommendations, Ms. Blass identified the following areas of concern:

  • the potential reliance of the SEC on non-SEC unregulated third-party standard setters in the ESG area;
  • the role of disclosure liability in mandated ESG disclosures; and
  • the different types of disclosures that might be required for different types of issuers and for advisers as opposed to issuers.

Commissioner Hester M. Peirce emphasized that including ESG considerations in investing does not require the SEC to upend its rules any more than with other genres of investing. Ms. Peirce described the conceptual challenges raised by ESG and proposed requirements as "amorphous" and susceptible to "manipulation" and variable interpretations. Ms. Peirce disagreed with the comparison of ESG disclosures to GAAP principles, stating that securities disclosures cannot be effective in aiding the capital markets to resolve their issues if they are utilized "as a forum for social and political discussion."

Commentary

Commissioner Peirce's statement reflects her skepticism of standardized ESG disclosure, a skepticism that is consistent with the current majority view at the SEC. Division Director Blass asks challenging questions as well.

Supporters of a mandated ESG disclosure regime (e.g., see here) advocate for a GAAP-type disclosure format. To date, however, they have not put out any specific proposals as to what such disclosure would look like or require. Perhaps these are to come shortly.

Primary Sources

  1. SEC Press Release: SEC Issues Agenda for Dec. 1 Meeting of the Asset Management Advisory Committee
  2. SEC Statement, Jay Clayton: Opening Remarks at the December 1, 2020 Meeting of the Asset Management Advisory Committee
  3. SEC Statement, Hester M. Peirce: Opening remarks at the December 1, 2020 Meeting of the Asset Management Advisory Committee
  4. SEC Statement, Dalia Blass: Remarks at the December 1, 2020 Meeting of the Asset Management Advisory Committee

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