SEC Seeks Public Opinion on ESG Issues, Sustainable Solutions

The acting head of the Securities and Exchange Commission has called on the public for input for its new disclosure requirements for climate change and other environmental, social, and governance issues.

“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,” Acting Chair Allison Herren Lee said during a speech at the Center for American Progress on Monday. “We see that unmistakably in shifts in capital toward ESG investing, we see it in investor demands for disclosure on these issues, we see it increasingly reflected on corporate proxy ballots, and we see it in corporate recognition that consumers and investors alike are watching corporate responses to these issues more closely than ever.”

Lee used the speech to formally request business leaders, market participants, and other stakeholders to comment on what the SEC should focus on when crafting new rules that require public companies to disclose ESG risks, MarketWatch reports.

“Investors are demanding more and better information on climate and ESG, and that demand is not being met by the current voluntary framework,” Lee said. “Not all companies do or will disclose without a mandatory framework, raising the cost, or resulting in the misallocation, of capital.”

Gary Gensler, President Joe Biden’s nominee to lead the SEC, has signaled his support for climate and other disclosure requirements as well.

While the issue of climate change is a primary focus of the public inquiry, the regulator said that staff is also evaluating “a range of disclosure issues under the heading of environmental, social, and governance, or ESG, matters,” and asked of the public whether it believes that new climate disclosures should be “one component of a broader ESG disclosure framework.”

Some Republicans have warned that this new SEC is reaching beyond its scope of power. For example, Pennsylvania Senator Pat Toomey, the ranking Republican on the Senate Banking Committee, warned that Lee’s plans for new rules on climate disclosure was a “total abuse of power and politicization of SEC’s disclosure standard,” in a tweet Monday.

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