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SEC Seeks Input on Climate Change Disclosures

Regulatory Agencies

Citing the demand for climate change information and questions about whether current disclosures adequately inform investors, the Securities and Exchange Commission is requesting input from investors, registrants and other market participants. 

This latest request appears to be another step in the SEC’s increasing focus on climate risk and environmental, social and governance (ESG) factors. In early February, Acting Chair Allison Herren Lee announced that she had appointed Satyam Khanna to serve in a new role as Senior Policy Advisor for Climate and ESG, and in late February directed the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings by evaluating and updating guidance issue in 2010 to take into account developments in the last decade. 

To facilitate the staff’s assessment, Lee has now released a set of 15 questions to be considered as part of the evaluation, including how the Commission can best regulate and guide climate change disclosures, and what information related to climate risks can be quantified and measured. 

“Not only have we seen a tremendous shift in capital towards ESG and sustainable investment strategies, but ESG risks and metrics now underpin many traditional investment analyses on investments of all types—a dynamic sometimes referred to as ‘ESG integration,’” Lee said in a March 15 speech before the Center for American Progress, where she announced the request for input. 

Lee’s public statement further explains that the 2010 guidance outlined certain ways in which climate change may trigger disclosure obligations under the SEC’s rules, but notes that, since then, investor demand for and company disclosure of information about climate change risks, impacts and opportunities has grown dramatically.  

According to the statement, input on the Commission’s climate change disclosure rules and whether they should be modified can include comments on existing disclosure requirements in Regulation S-K and Regulation S-X, and potential new disclosure requirements or frameworks that the Commission might incorporate. 

Information about how to submit comments can be found in Lee’s March 15 public statement. Additionally, she encourages commenters to submit empirical data and other information in support of their comments.

The Acting Chair also noted in her speech that she has asked the SEC staff to consider whether to revisit the Commission’s guidance on proxy voting responsibilities of investment advisers out of concern that the August 2019 guidance discourages fiduciaries from voting in certain circumstances. 

Gary Gensler, who has been nominated by President Biden to serve as Chair of the SEC, stated at his confirmation hearing before the Senate Banking, Housing and Urban Affairs Committee that, if confirmed, he would seek additional guidance on climate-related disclosures in public company filings.

The SEC also recently announced that its 2021 examination priorities will include a greater focus on climate and ESG-related risks by examining proxy voting policies and practices to ensure voting aligns with investors’ best interests and expectations, as well as firms’ business continuity plans.