Some Members of Congress have written to SEC Chairman Gensler to remind him what the “materiality” standard is and conclude without reference to any data that the Commission may not be clear on it.
We also caution the SEC against outsourcing its responsibilities to ostensibly “independent” third-party standard setters that have agendas outside the scope ofthe Federal securities laws and that do not recognize the standard ofmateriality that has served U.S. capital markets so well. Some of these organizations are funded or supported by entities that have a vested interest in the SEC adopting a complex reporting regime for climate change and related environmental, social, and governance (ESG) disclosures. It is the SEC’s job to look out for Main Street investors, not a cottage industry of standard setters and ratings firms that stand to benefit from further SEC regulation in this area.
We echo the concerns raised recently by Commissioner Hester Peirce about the SEC’s open interest in aligning climate and ESG reporting standards with international standard setters.
They do not echo Commissioner Lee’s recent detailed explanation of what materiality means with regard to environment-related disclosures and why current rules are not adequate.