The SEC should update its reporting requirements for issuers to include ESG factors, the commission's investor advisory committee said Thursday, voting to approve a recommendation drafted by the committee's investor-as-owner subcommittee.
"The time has come for the SEC to address this issue," said the recommendation. ESG disclosure from issuers will provide investors "with the material, comparable, consistent information they need to make investment and voting decisions," and give issuers a uniform framework. It will also let the SEC take control of ESG disclosure "before other jurisdictions impose disclosure regimes on U.S. issuers and investors alike," the recommendation said.
The commission should "begin in earnest" updating the reporting requirements of issuers to include "decision-useful" ESG factors, starting with outreach efforts to investors, issuers and other market participants that would help SEC staff evaluate options for updating SEC reporting requirements.
"Investment and voting based in part on ESG disclosure is front and center in today's global investment ecosystem. Major business risks, decisions and strategies stand upon ESG factors, and investors are not being served or protected by the piecemeal, ad-hoc, inconsistent information currently in the mix," the recommendation said.
While a few committee members did not agree that a case for ESG materiality had been made, the majority did, noting that the recommendation is not prescriptive.
"I do think it's time for the SEC to do something," said Anne Sheehan, advisory committee chairwoman and former director of corporate governance for the $239.9 billion California State Teachers' Retirement System, West Sacramento.