The US Securities and Exchange Commission (SEC) is seeking market feedback on best practices for carbon disclosure, as the agency under President Joe Biden places environmental and social governance (ESG) issues "front and center," acting chair Allison Herren Lee said.
The commission is seeking input from investors, registrants and other market participants on climate change disclosure so that it can take the best regulatory approach, Lee said. It is working to facilitate the disclosure of "consistent, comparable and reliable information" on climate change.
"Investors are demanding more and better information on climate and ESG, and that demand is not being met by the current voluntary framework," Lee said yesterday during a virtual event hosted by the Center for American Progress. Investors are not receiving the benefits of comparability that would come with standardized disclosures, she said.
"It is time to move from the question of ‘if' to the more difficult question of ‘how' we obtain disclosure on climate," she said. "That supposed distinction — between what is ‘good' and what is profitable, between what is sustainable environmentally and what is sustainable economically, between acting in pursuit of the public interest and acting to maximize the bottom line — is increasingly diminished."
Mandatory climate risk disclosure is imperative as more corporations set net-zero carbon targets, Mindy Lubber, president of sustainable investment advocacy organization Ceres, told Argus. "Everyone has to live by a government standard."
The SEC request comes two weeks after the commission announced the creation of a climate and ESG task force in its division of enforcement, which will identify ESG-related misconduct. The task force will initially focus on identifying any "material gaps or misstatements" in issuers' disclosure of climate risks.
The US Chamber of Commerce has "urged caution" on the SEC's work on ESG standards, executive vice president Tom Quaadman said.
"While disclosures may be a part of an all-of-government, comprehensive policy to combat climate change, disclosures should be used to protect investors and should not be used as a means to achieve policy goals outside the scope of the federal securities laws," he said.
The new SEC initiative comes as energy companies face increasing pressure from activists over how they portray their climate-related activities to the public.
Earthworks and other activists today said they filed a first-time complaint against Chevron for "unlawfully deceptive advertisements" that they say overstate the company's investment in renewables and its efforts to reduce greenhouse gas emissions. The complaint asks the US Federal Trade Commission to enforce environmental marketing guidelines against the company.
Chevron said the allegations in the complaint are "frivolous." The company said it was taking action to reduce the carbon intensity of its operations and increasing its use of renewable energy.
