SEC Seeks Climate Change Disclosure Input

The Securities and Exchange Commission (SEC) is requesting input from investors, registrants, market participants, and the general public regarding the adequacy and effectiveness of the regulator’s climate change disclosure rules.

SEC Acting Chair Allison Herren Lee said that because of increasing demand for climate change information and questions about current disclosures, she is asking the regulator’s staff to evaluate disclosure rules with a focus on facilitating the disclosure of “consistent, comparable, and reliable information on climate change.”

In the short time since the Biden administration installed new leadership at the SEC, the regulator has shown a keen interest in the investment community’s relationship with climate change and environmental, social, and governance (ESG) concerns.

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In February, Lee said she was directing the SEC’s Division of Corporation Finance to improve its focus on climate-related disclosure in public company filings.

“Now more than ever, investors are considering climate-related issues when making their investment decisions,” Lee said in a statement last month. “It is our responsibility to ensure that they have access to material information when planning for their financial future.”

And earlier this month, Lee said climate and ESG-related risks will be a higher priority for the SEC in 2021 than they have been in recent years. She said the SEC’s Division of Examinations is “enhancing its focus on climate and ESG-related risks by examining proxy voting policies and practices,” and added that the SEC is “integrating climate and ESG considerations into the agency’s broader regulatory framework.”

The SEC also recently launched a climate and ESG task force that will develop initiatives to identify ESG-related misconduct and will initially focus on material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.

Lee said that over the past decade, investor demand for—and company disclosure of —information about climate change risks has grown dramatically.

Last May, the SEC’s Investor Advisory Committee approved recommendations that called on the regulator to update reporting requirements for issuers to include “material, decision-useful ESG disclosure.” And in December, the ESG Subcommittee of the SEC Asset Management Advisory Committee issued a preliminary recommendation that the SEC require the adoption of standards by which corporate issuers disclose material ESG risks.

To aid the SEC staff’s assessment, Lee listed 15 questions to consider as part of the regulator’s climate change disclosure evaluation. She also encouraged commenters to submit empirical data and other information. Some of the questions for consideration include:

How can the SEC best regulate, monitor, review, and guide climate change disclosures in order to provide more consistent, comparable, and reliable information for investors while also providing greater clarity to registrants as to what is expected of them?
What information related to climate risks can be quantified and measured? How are markets currently using quantified information?
What are the advantages and disadvantages of permitting investors, registrants, and other industry participants to develop disclosure standards mutually agreed by them?
What are the advantages and disadvantages of establishing different climate change reporting standards for different industries?
What are the advantages and disadvantages of rules that incorporate or draw on existing frameworks?
How should any disclosure requirements be updated, improved, augmented, or otherwise changed over time?
What is the best approach for requiring climate-related disclosures? Should disclosures be incorporated into existing rules or should a new regulation devoted entirely to climate risks, opportunities, and impacts be promulgated?
How, if at all, should registrants disclose their internal governance and oversight of climate-related issues?
What are the advantages and disadvantages of developing a single set of global standards applicable to companies worldwide?
How should disclosures under any such standards be enforced or assessed?

The SEC said members of the public are invited to submit their input via a webform or email address.