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SEC Commissioner Hester Peirce Urges ESG Policy Advocates to Rethink Approach

SEC Commissioner Hester Peirce urged advocates of environmental, social and corporate governance ("ESG") to encourage the public to develop solutions to climate and societal challenges instead of pursuing a “prescriptive approach.”

Citing “mounting pressure” to support a single global set of metrics, Ms. Peirce stated a common disclosure metrics would restrict capital allocation decision-making and "impede creative thinking." Ms. Peirce contrasted ESG disclosures with financial accounting disclosures, explaining that the former are not static or easily comparable across industries. Ms. Peirce added that government-outlined ESG disclosure metrics would hinder the ability of the markets to utilize price signals to devise innovative solutions to contemporary challenges. In addition, Ms. Peirce stated the convergence of ESG disclosure standards does not align with the SEC's existing disclosure framework, which is grounded in "investor-oriented financial materiality" and principles-based disclosure requirements to accommodate the variation in issuers.

Ms. Peirce also expressed concern that a stakeholder-focused regime would (i) increase the jurisdictional scope of the SEC, (ii) impose additional costs on public companies, (iii) reduce the appeal of U.S. capital markets, (iv) distort capital allocation and (v) weaken shareholders' role in corporate governance.

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