Press Release – WASHINGTON, D.C. – Environmental groups have called on the Securities and Exchange Commission to require company disclosure on environmental, social, and governance risks to investors. The Center for International Environmental Law, Center of Concern, Environmental Investigation Agency, Foundation Earth, Friends of the Earth, Greenpeace USA, Rainforest Action Network, and the Sierra Club, in coordination with Osgoode Hall Law Professor Cynthia Williams, advocated for this in a comment letter in response to a recent SEC Concept Release on Business and Financial Disclosures.
This Concept Release requests public comment on ways the SEC should modernize business and financial disclosures in periodic reports, many of which have changed little since their adoption more than 30 years ago. In the comment letter, the environmental groups make the case that the SEC should create uniform Environmental, Social, and Governance disclosure requirements for companies that would allow investors to easily compare ESG risks between companies to decide where to invest and how to vote.
“Capital market regulation in the United States depends on accurate information to direct capital, and to date there is insufficient clear, comparable ESG data for the markets to function properly in this regard,” stated Osgood Hall Law Professor Cynthia Williams. “None of the commenting organizations think that markets alone can solve the systemic problems that drive sustainability concerns, but they do recognize the importance of well-regulated markets in supporting the necessary transition to a socially-just, sustainable economy.”
“More people are choosing to invest in companies without negative environmental and social impacts, but many find it difficult to assess companies’ claims” says CIEL Senior Attorney Melissa Blue Sky. “The SEC should require reporting on ESG risks so that investors can more easily identify companies that reflect their values.”
Socially responsible investing is a strategy investors use to ensure their investments are being used in companies that do not follow their moral values. Historically this strategy has been used to limit investments in gambling, alcohol, and tobacco products. However SRI has now expanded to considering values in human rights, environmental protection, corporate corruption, and labor issues. Today, $6.7 trillion in the U.S. is invested using SRI strategies.
“Whether it’s extractive industries driving climate change or big agribusiness driving land use change, corporate activities regularly cause serious harm to the environment and to communities’ rights. Both as a matter of ethical principal and as a matter that is material to the financial landscape in which these companies operate, shareholders and the public need to know about the full range of Environmental, Social and Governance risks associated with corporate activities,” said Michelle Chan, vice president of programs with Friends of the Earth. “We need the SEC to mandate disclosure of ESG risks and impacts so both shareholders and communities affected by these impacts have the information they need to respond.”
“Corporations have a responsibility to respect human rights and to avoid harming the environment,” stated Naomi Ages, Climate Liability project lead at Greenpeace USA. “The SEC has a critical role to play in ensuring that investors can make decisions consistent with their desire to respect those principles. Mandatory ESG disclosure is an efficient way to bring these material concerns to the attention of corporations and investors.”
The SEC Concept Release was published on April 13 of this year. The SEC has not indicated when it will issue new regulations to update and modernize existing financial disclosure requirements. To view the Concept Release and its public comments, please click here.
