Posted on Tuesday, December 1, 2020

The Securities and Exchange Commission’s Asset Management Advisory Committee published on December 1, 2020, the potential recommendations of its ESG (Environmental Social Governance) Subcommittee which focused on the adoption of standards for disclosures from issuers and for ESG investment products:

Recommendations Regarding Issuer Disclosure of ESG Risks:

  • The SEC should require the adoption of standards by which corporate issuers disclose material ESG risks.
  • The SEC should utilize standard setters’ frameworks to require disclosure of material ESG risks.
  • The SEC should require that material ESG risks be disclosed in a manner consistent with the presentation of other financial disclosures.

Recommendations Regarding ESG Investment Product Disclosure:

  • The SEC should suggest best practices to enhance ESG investment product disclosure, including alignment with the taxonomy developed by the ICI ESG Working Group, and clear description of each product’s strategy and investment priorities, including description of non-financial objectives such as environmental impact or adherence to religious requirements.
  • The SEC should suggest best practices for investment products to describe each product’s planned approach to share ownership activities in the Statement of Additional Information, and any notable recent ownership activities outside proxy voting, which is reported in Form N-PX, in shareholder reporting.