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Securities and Exchange Commission chairman Gary Gensler elaborates on his thoughts on climate risk and human capital disclosure.
The SEC recently closed a public filing period to expand corporate climate disclosure. It has also established a Climate and ESG Enforcement Task Force.
Speaking for London City Week today, Gensler said the SEC had received more than 400 unique comment letters on environmental, social and governance issues.
Now he’s starting to look more closely at what information the SEC might be looking for.
He asked his staff to look at a number of more specific metrics, such as greenhouse gas emissions, to determine which are most relevant to investors.
Gensler also wants to know whether the companies are meeting the commitments they have already made on climate issues.
“I also asked employees to consider potential requirements for companies that have made forward-looking climate commitments or that have significant activity in jurisdictions with national requirements to meet specific climate-related goals,” he said.
More information on ESG marketing
ESG is one of the hottest investment segments right now, and Gensler says he would like more information on what these properties are and how they are being marketed.
“I also asked staff to look at how funds market as sustainable, green and ‘ESG’ to investors and what factors support those claims,” he said.
Disclosure of human capital
Gensler would also like more information about human capital disclosure or how companies interact with their employees.
“This builds on past agency work and could include a number of metrics such as: B. Employee turnover, skills and development training, compensation, social benefits, workforce demographics including diversity, and health and safety, ”said Gensler. “Disclosure helps companies raise money. It helps allocate capital in the market efficiently. And it helps investors invest their money in the companies that meet their investment needs.”
Treasury Markets and Beneficial Ownership
Gensler also said he would seek more transparency on how US Treasuries are bought and sold, noting, “At the start of the pandemic, we saw a deterioration in liquidity affecting critical parts of the treasury market”.
Gensler also wants to change the rules on beneficial ownership that require major shareholders of listed companies to disclose information.
“Under current regulations, beneficial owners of more than 5% of the equity securities of a stock corporation who intend to control have 10 days to report their possession. We have not updated this deadline for over 50 years … I asked the staff like “We could update these rules, including possibly shortening the reporting deadlines.”
Republicans are pushing back
The Republicans of the House of Representatives have warned the SEC not to impose a climate risk disclosure requirement because the SEC is exceeding its limits.
The legal question is materiality: does ESG information matter to investment returns?
Gensler believes it does, and not everything the SEC requires must be “material” to require disclosure.