The SEC’s
Asset Management Advisory Committee (AMAC), a group of investors and other experts, has advised the SEC that the existing regulatory regime is sufficiently robust to require companies to disclose material ESG risks and opportunities, and does not need a specific mandate or rule on ESG disclosures. However, the committee believes the SEC should adopt guidelines on how to effectively disclose material ESG information.
The
recommendation was published on July 7 by AMAC’s subcommittee on ESG. Specifically, and somewhat surprisingly, the subcommittee only recommended the following:
- Take steps to foster meaningful, consistent, and comparable disclosure of material ESG matters by issuers.
- Encourage issuers to adopt a framework for disclosing material ESG matters and to provide an explanation if no disclosure framework is adopted.
- Accelerate its study of third-party ESG frameworks for the disclosure of material ESG matters and assess how frameworks could play a more authoritative role in the near future.
In the report, the AMAC concluded “it was premature to broadly recommend specific mandated disclosure of material ESG matters through SEC rulemaking or required adoption of third-party standards. Nevertheless, the AMAC believes there is a pressing need for the SEC to effect a process for enhancing the quality, consistency, and comparability of ESG disclosures that issuers make to investors.”
The AMAC is purely an advisory body, so its suggestion that the SEC move away from an ESG disclosure mandate may be overruled by those within the agency who prefer a more prescriptive approach. Indeed, Chair Gensler and Commissioners Caroline Crenshaw and Allison Lee all
spoke at the meeting regarding their hopes that consistent and comparable standards for ESG disclosure could be established (while Commissioner Peirce opposed the establishment of a “FASB-like” standard setting entity as contemplated by the AMAC).
Nevertheless, it is very interesting that a body of investors and investor representatives would oppose a prescriptive mandate on ESG disclosures, suggesting that mainstream investors support the current principles-based rule and are not pushing for further requirements. This will be an important viewpoint for the SEC to consider as it contemplates a future rule.
