The deadline for the public to submit comments to the SEC on the topic expired on Monday. Thousands of investors and advocates, from large asset managers to individual investors, as well as companies and trade groups made submissions, which were accessible on the SEC website.
The SEC said last week it may propose new rules on ESG disclosures in October. Such a move would mark a big change under new SEC chair Gary Gensler, who was nominated by President Joe Biden as part of a broader push to tackle climate change and social injustice.
“The current state of climate change disclosure does not meet our needs,” Ceres, a Boston-based coalition of more than 500 investors, environmental organizations and public-interest groups, said in one of the letters.
The group called on the SEC to take a broad view of the impact of climate change, including the implications for human rights and the connection between climate, water, food and forests.
Companies and corporate lobby groups including trade groups for petroleum producers and banks, on the other hand, urged the SEC to give them broad discretion in their ESG disclosures. They argued one-size-fits-all requirements do not work in practice. Companies themselves are best placed to assess which information is the most important or material for their investors, they said.
“Disclosure mandates should not be prescriptive, but rather should continue to be flexible so that disclosures respond to changes in facts, circumstances, risks and other developments,” wrote Tom Quaadman, an executive vice president at the U.S. Chamber of Commerce.
The United States has no specific climate disclosure rules. It also has not agreed on definitions for key terms such as sustainable and has no uniform standards for measuring corporate environmental goals or quantifying and reporting climate risks, although many companies make ESG disclosures under a range of voluntary standards.
The public comments will help inform the SEC’s rulemaking, which must still undergo a formal process of consideration.
The stakes are high. More Wall Street fund managers are throwing their weight behind investor demands to companies on ESG issues. They are turning up the heat by publicizing how and why they voted, as billions of dollars flow every day into funds focused on sustainable investing.
In the letters reviewed by Reuters, investors argued public disclosures of how a company’s management attracts, develops and retains personnel -- also known as its human capital -- can shed light on its long-term prospects. They also want to be able to hold companies accountable on how they treat their workers.
“Stronger human capital reporting, especially quantitative metrics rather than just qualitative narrative, is associated with higher returns on invested talent and higher operating margins and better risk-adjusted returns,” said Eleanor Eagan, a research director at the Center for Economic and Policy Research’s Revolving Door Project, a Washington-based non-profit organization that aims to educate investors.
Other investor-focused groups, such as the Sustainability Accounting Standards Board and the Principles for Responsible Investment, also said the SEC needs robust, consistent disclosures to help investors measure human capital metrics across sectors.
“For the SEC to get this right, investors will need to be very clear about what they are interested in and what they aren’t,” said Aniket Shah, who leads ESG and sustainability research at investment bank Jefferies Financial Group Inc.