Representatives Juan Vargas (D-CA) and co-sponsor Jesús G. Garcia (D-IL) introduced legislation that would update environmental, social and governance ("ESG") disclosure requirements for public companies. Under the legislation, "ESG metrics" would be deemed "de facto material for purposes of disclosures" under the Securities Act and the Exchange Act.
Specifically, H.R. 4329 (the "ESG Disclosure Simplification Act of 2019") would:
require public companies to provide a "clear" description of (i) the connection between ESG metrics and long-term business strategies and (ii) the process used to determine how ESG metrics impact the long-term business strategies of the issuer; and
amend SEA Section 4 to require the SEC to establish a permanent advisory committee, called the "Sustainable Finance Advisory Committee," to be made up of up to 20 members who may serve for up to four years. Each Commissioner of the SEC would select an equal number of members of the Committee. Members of the Committee are required to represent individuals and entities with an interest in "sustainable finance." The work of the Committee is to be supported by staff personnel of the Investor Advocate who are dedicated to ESG issues. For this purpose, "sustainable finance" means investments that take into account "environmental, social and governance considerations."
IOSCO urged issuers to address environmental, social and governance matters in disclosures to investors.
SEC Commissioner Hester M. Peirce expressed concern regarding the accuracy of experts' criteria for assessing a company's environmental, social and governance factors.
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