Putting the Electric Cart Before the Horse: Addressing Inevitable Costs of a New ESG Disclosure Regime

Putting the Electric Cart Before the Horse: Addressing Inevitable Costs of a New ESG Disclosure Regime
(AP Photo/Alastair Grant)
Thank you to Dan [Bigman] and the Corporate Board Member for inviting me to participate in today’s ESG Board Forum.  Of course, the views I express here are my own and do not necessarily represent those of my fellow Commissioners.
As the topic of this event indicates, ESG is on everyone’s mind this year.  There have been several calls for the SEC to require public issuers to include granular disclosure on ESG topics in their SEC filings.  As you have probably heard me say before,[2] I have reservations about the SEC issuing prescriptive, line-item disclosure requirements in this space, particularly in the areas typically designated as environmental (“E”) or social (“S”) disclosure, although I know people’s categorization of ESG information can vary.[3]  As someone recently put it to me, the reason that there is not standardized “E” data from companies yet is that standardization is very hard to do.  Investors and fund managers have an insatiable desire for columns in spreadsheets, but some of the data that has been requested is inherently imprecise, relies on underlying assumptions that continually evolve, and can be reasonably calculated in different ways.  And ultimately, unless this information can meaningfully inform an investment decision, it is at best not useful and at worst misleading.
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