Posted on Tuesday, March 16, 2021

The Securities and Exchange Commission published a speech from Acting SEC Chair Allison Herren Lee, titled “A Climate for Change: Meeting Investor Demand for Climate and ESG Information at the SEC”. In her speech, the SEC Chair references an SEC Request for Comment on Climate Disclosure which includes a list of detailed questions covering topics such as “advantages and disadvantages of developing a single set of global standards” to help inform the Commission’s policymaking. Comments are due in 90 days and XBRL US will plan on submitting a comment letter.  This is a great opportunity to support the work of the Sustainability Accounting Standards Board (SASB) in building an XBRL Taxonomy to report ESG metrics.

Here are a few pertinent quotes from Chair Lee’s speech:

Not only have we seen a tremendous shift in capital towards ESG and sustainable investment strategies, but ESG risks and metrics now underpin many traditional investment analyses on investments of all types – a dynamic sometimes referred to as “ESG integration.” In other words, ESG factors often represent a core risk management strategy for portfolio construction. That’s because investors, asset managers responsible for trillions in investments, issuers, lenders, credit rating agencies, analysts, index providers, and other financial market participants have observed their significance in terms of enterprise value. They have embraced sustainability factors and metrics as significant drivers in decision-making, capital allocation, and pricing…

That’s why climate and ESG are front and center for the SEC. We understand these issues are key to investors – and therefore key to our core mission…

 Investors are demanding more and better information on climate and ESG, and that demand is not being met by the current voluntary framework. Not all companies do or will disclose without a mandatory framework, raising the cost, or resulting in the misallocation, of capital. Investors also aren’t getting the benefits of comparability that would come with standardization. And there are real questions about reliability and level of assurance for the disclosures that do exist. Meanwhile issuers are assailed from all sides by competing and potentially conflicting demands for information. That’s why we have begun to take critical steps toward a comprehensive ESG disclosure framework aimed at producing the consistent, comparable, and reliable data that investors need… 

Finally, I want to highlight the importance of engagement and cooperation on these issues. As I mentioned, ESG, and climate risks in particular, do not observe jurisdictional boundaries. That is why I am committed to close regulatory cooperation, both domestically with Treasury and other financial regulators, and internationally through bilateral cooperation and through supporting the important multilateral work being done through IOSCO and the FSB. 

Read the speech.