Nell Minow’s Comment to the SEC on Proposed Climate Change Disclosure Rule

VEA Vice Chair Nell Minow has submitted a comment to the SEC on File No. S7-10-22, Proposal on Climate-Related Disclosures for Investors. The full comment is attached below. An excerpt:

Government regulation is most needed when there are collective choice issues or conflicts of interest. Both are the case when it comes to corporate disclosures. Executives and board members would prefer to control the information that is – and especially is not – shared with investors. And the informational asymmetry is insurmountable without government intervention because investors are so widely dispersed and unable to communicate or work with each other, in part due to the Commission’s own rules. We have seen that this is not a problem the market alone can solve.  As the Commission reviews the comments on this proposal, as in any other issue of materiality, the priority should be what investors say they need, not what executives say they want to provide.

According to a new study from IBM[1], 37 percent more CEOs in 2022 rate sustainability as a top priority, compared to 2021, 83 percent of CEOs expect sustainability investments to produce improved business results in the next 5 years, and 57 percent of CEOs identify unclear ROI and economic benefits as a leading challenge.

The study concludes: 

We’ve reached an inflection point.

For some time, the role of business in sustainability has received steadily increasing attention from companies and their stakeholders. But over the past year, something changed for CEOs worldwide, and sustainability talk turned into action. Continued disruption—including upheaval from the pandemic—has society calling for a new approach to economic activities and business priorities.

Our latest CEO study, drawn from interviews with 3,000 CEOs worldwide, reveals sustainability’s dramatic emergence onto the mainstream corporate agenda. For a few, this ascent is validation of long-held beliefs and years of planning. For most CEOs, however, an urgency to act is encountering the reality that turning sustainability aspirations and commitments into measurable results is easier said than done.

On the other hand, a recent study from Google found[2]:

Environmental, Social, and Governance initiatives came out as a top organizational priority, on par with evolving or adjusting business models, with close to 10 percent of a company’s budget going to sustainability efforts. Executives are willing to grow their business in a way that is sustainable, even if it means lower revenue in the near future. 

At face value, 80 percent of executives give their organization an above average rating for their environmental sustainability effort. Eighty-six percent (86 percent) believe their efforts are making a difference in advancing sustainability.

The research showed a troubling gap between how well companies think they’re doing, and how accurately they’re able to measure it. Only 36 percent of respondents said their organizations have measurement tools in place to quantify their sustainability efforts, and just 17 percent are using those measurements to optimize based on results.

Businesses across industries struggle to quantify their sustainability efforts, with 65 percent agreeing they want to advance sustainability efforts, but don’t know how to actually do it – executives in Supply Chain/Logistics and Healthcare/Life Science top the list at 79 percent and 74 percent respectively, and retail at just 54 percent. 

Leadership towards sustainability starts at the top of the organizational chart. When asked which groups are enabling organizational sustainability, 53 percent pointed to board members and senior leaders. But they hunger for more: 82 percent agreed with the statement, “I wish our board or senior leadership gave us more room to prioritize sustainability.”

Climate change should be a central concern for every corporation because it affects every aspect of business, from government contracts to supply chains to regulatory risk to consumer and employee demand (discussed further below). Just a few of the many risks and opportunities they should be responding to:

  • President Joe Biden’s Navy Secretary Carlos Del Toro called climate change an “existential threat” and said it was the “focal point” of his time in the position. The Navy’s report[3], “Climate Action 2030,” sets forth the stated goals to “build climate resilience” and “reduce climate threat.”
  • The Biden administration’s ambitious 2030 greenhouse gas goals[4] include government-wide initiatives that will affect every part of the US economy.
  • The UN’s sustainable development goals[5] touch on every part of the global economy. 
  • Consumers expect brands to address climate change[6]. Deloitte reports: 
  • Research shows that consumers expect businesses to step up, especially when it comes to issues of climate change and the environment. To adapt to the growing demand for action, organizations can work harder to anticipate shifts in public opinion. By identifying and responding to such shifts, C-suite leaders can make their organizations more resilient to risk. What’s more, executives can build consumer loyalty and drive revenue growth by aligning their actions to stakeholder values.
  • Employees are increasingly insistent on employers addressing climate change.[7]








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