SEC Acting Chair Allison Lee has continued her rapid policy agenda rollout while Gary Gensler awaits Senate confirmation. The Senate is scheduled to consider Mr. Gensler’s nomination on Monday, March 22, but a vote has not been officially scheduled; rumors say Senate Minority Leader Mitch McConnell is deliberately delaying the vote to retain a split SEC as long as possible.
Acting Chair Lee has signaled movement on a multitude of ESG issues:
- Potential reform to Form N-PX in which an investment manager will disclose how each of its funds voted at portfolio companies to standardize disclosures and allow for easier comparisons.
- A request for comments from companies, investors and market participants on potential climate disclosure rule-makings, including a list of 15 questions for SEC staff to use in considering new potential rules.
- The creation of a 22-member climate and ESG task force in the agency’s Division of Enforcement to “proactively” identify misconduct, gaps, omissions and misstatements in climate risk disclosures. The task force will review compliance with current rules regarding disclosure of financial and operational risks related to climate change and ESG.
- The establishment of a new staff position – Senior Policy Adviser for Climate and ESG.
The actions send a clear signal that the SEC is transitioning from questioning whether companies should disclose ESG risks to scrutinizing and enforcing tighter disclosures on those issues.
SEC Chair nominee Gary Gensler, although he has not openly supported Acting Chair Lee’s flurry of activity, is not likely to unwind recent actions once confirmed. Mr. Gensler stated his belief that “[i]t’s the investor community that gets to decide” what is material and indicated that he supports Ms. Lee’s efforts to increase climate risk disclosures. However, he may seek to moderate the pace or address other concerns such as price volatility and the rise of special purpose acquisition companies (SPACs).
The Center is currently crafting comments on the SEC’s questions regarding climate risk disclosures and use of ESG incentive plan metrics and will circulate them once complete.
