Investors and associated organizations representing more than $5 trillion in assets under management have submitted a petition for a rulemaking on environmental, social, and governance (ESG) disclosure authored by Professor Cynthia A. Williams and Professor Jill Fisch.
From the introduction:
We respectfully submit this petition for rulemaking pursuant to Rule 192(a) of the Securities and Exchange Commission’s (SEC) Rule of Practice.
Today, investors, including retail investors, are demanding and using a wide range of information designed to understand the long-term performance and risk management strategies of public-reporting companies. In response to changing business norms and pressure from investors, most of America’s largest public companies are attempting to provide additional information to meet these changing needs and to address worldwide investor preferences and regulatory requirements. Without adequate standards, more and more public companies are voluntarily producing “sustainability reports” designed to explain how they are creating long-term value. There are substantial problems with the nature, timing, and extent of these voluntary disclosures, however. Thus, we respectfully ask the Commission to engage in notice and comment rule-making to develop a comprehensive framework for clearer, more consistent, more complete, and more easily comparable information relevant to companies’ long-term risks and performance. Such a framework would better inform investors, and would provide clarity to America’s public companies on providing relevant, auditable, and decision-useful information to investors.
We briefly set out six arguments supporting this petition:
The SEC has clear statutory authority to require disclosure of ESG information, and doing so will promote market efficiency, protect the competitive position of American public companies and the U.S. capital markets, and enhance capital formation;
ESG information is material to a broad range of investors today;
Companies struggle to provide investors with ESG information that is relevant, reliable, and decision-useful;
Companies’ voluntary ESG disclosure is episodic, incomplete, incomparable, and inconsistent, and ESG disclosure in required SEC filings is similarly inadequate;
Commission rulemaking will reduce the current burden on public companies and provide a level playing field for the many American companies engaging in voluntary ESG disclosure; and
Petitions and stakeholder engagement seeking different kinds of ESG information suggest, in aggregate, that it is time for the SEC to regulate in this area.