The SEC should facilitate creative thinking to address ESG issues, not require companies to disclose standard ESG metrics, Commissioner Hester Peirce said in a statement.
In "Rethinking Global ESG Metrics," Ms. Peirce noted "mounting pressure" for a single global set of ESG metrics, and that "the idea of enlisting the securities laws to achieve ESG objectives is gaining traction among activists and policy elites," with some advocates calling for alignment with European rules in the works or standards set by an international body.
Though that might sound good at first, common disclosure metrics would lead to homogenized capital allocation decisions and impede creative thinking, said Ms. Peirce, who has echoed similar concerns in recent speeches.
"Unlike financial accounting, which lends itself to a common set of comparable metrics, ESG factors, which continue to evolve, are complex and not readily comparable across issuers and industries," she said in her post Wednesday.
In addition to stifling innovation, "converging standards would be antithetical to our existing disclosure framework, which is rooted in investor-oriented financial materiality and principles-based requirements to accommodate the wide variety of issuers," she said.
Ms. Peirce also worries about the implications of a stakeholder-focused disclosure regime, that "would likely expand the jurisdictional reach of the Commission, impose new costs on public companies, decrease the attractiveness of our capital markets, distort the allocation of capital, and undermine the role of shareholders in corporate governance."