US SIF Statement on Petition to the SEC on Disclosure of ESG Information
ESG information is material to investors, and the SEC has clear statutory authority to require public companies to disclose these risks.Washington, DC, October 2, 2018 - Today, US SIF: The Forum for Sustainable and Responsible Investment, joined by securities law experts, state treasurers, public pension funds, unions, and foundations, filed a petition at the Securities and Exchange Commission (SEC) calling for a rulemaking on comprehensive corporate disclosure of environmental, social and governance (ESG) information.
“The lack of comprehensive, comparable and reliable data hinders investor efforts to most effectively incorporate ESG information into investment decisions,” said Lisa Woll, CEO of US SIF. “ESG information is material to investors, and the SEC has clear statutory authority to require public companies to disclose these risks. We believe public companies should be required to report a comprehensive, uniform set of environmental, social and governance indicators. US SIF has called for robust ESG disclosure reporting since 2009. Meaningful disclosure reporting is beneficial to a wide array of stakeholders.”
Investors who consider ESG criteria in managing their assets account for more than one out of every five dollars under professional management in the United States or $8.72 trillion at the start of 2016. This was an increase of 33 percent since 2014, according to the US SIF Foundation's 2016 Report on US Sustainable, Responsible and Impact Investing Trends.
The rulemaking petition:
- Calls for a new rulemaking that would develop a comprehensive framework requiring issuers to disclose identified ESG aspects of each public reporting company's operations;
- Lays out the statutory mandate the SEC already has to require ESG disclosure;
- Discusses the clear materiality of ESG issues;
- Points to the existing rulemaking petitions, investor proposals and stakeholder engagements on human capital management, climate, tax, human rights, gender pay ratios and political spending; and
- Highlights how these efforts suggest, in aggregate, that it's time for the SEC to bring coherence to this area.
The petition was drafted with the guidance of American securities law expert Professor Cynthia A. Williams, who is currently at Toronto's Osgoode Hall Law School, and Jill E. Fisch, who is currently at the University of Pennsylvania Law School.
For years, investors have been calling upon the SEC to require companies to disclose various types of ESG risks relating to environmental harm, political spending, equal employment opportunity and diversity, and labor and human rights. The SEC collected 279 non-form letter public comments in 2016 on the Regulation S-K Concept Release, two-thirds of which related to sustainability reporting, and of that group, 80 percent called for increased sustainability disclosure. No action has been taken on the Concept Release.