SEC Pushes for More ESG Transparency to Meet Investor Demand

Environmental, social, and governance (ESG) investing could get assistance from an unlikely source in the Securities and Exchange Commission (SEC).

With the installation of Allison Lee as the acting chair of the SEC, a greater push toward ESG transparency to meet investor demand could be on the horizon.

“Allison Herren Lee was named acting chair of the Securities and Exchange Commission in January, and since then she has been active, especially when it comes to environmental, social and governance, or E.S.G., issues,” a New York Times article reported. “The agency has issued a flurry of notices that such disclosures will be priorities this year. Today (March 15), Ms. Lee, who was appointed as a commissioner by President Donald Trump in 2019, is speaking at the Center for American Progress, where she will call for input on additional E.S.G. transparency, according to prepared remarks seen by DealBook.”

According to the article, Lee will argue that “acting in pursuit of the public interest and acting to maximize the bottom line” can work in tandem when it comes to the SEC’s role in ESG.

“That demand is not being met by the current voluntary framework,” the article continued. “Human capital, human rights, climate change — these issues are fundamental to our markets, and investors want to and can help drive sustainable solutions on these issues.”

Getting ESG Exposure in an ETF Wrapper

SEC ESG involvement could help spur more interest in ESG ETFs. One fund to consider is the SPDR S&P 500 ESG ETF (EFIV).

The fund seeks to provide investment results that correspond generally to the total return performance of an index that provides exposure to securities that meet certain sustainability criteria (criteria related to ESG factors), while maintaining similar overall industry group weights as the S&P 500 Index.

In seeking to track the performance of the S&P 500 ESG Index, the fund employs a sampling strategy, which means that it is not required to purchase all of the securities represented in the index. Overall, EFIV gives investors:

  • Investment results that, before fees and expenses, correspond generally to the S&P 500 ESG Index.
  • Potential ESG core exposure, based on its focus on sustainability criteria and comprehensive market coverage of the flagship core S&P 500 Index.
  • A low expense ratio of 0.10%, 27 basis points below the category average.
  • Strong 12-month performance of plus 22%.

EFIV Chart

For more news and information, visit the ESG Channel.