SEC Commissioner Peirce Makes the Case Against ESG Mandates

SEC Commissioner Hester M. Peirce criticized ESG mandates for distorting capital flows, obscuring material information and rewarding "lobbying prowess."

At the International Center for Insurance Regulation at the Digital Insurance Forum, Ms. Peirce warned that the ESG movement substitutes analysis with "a box-checking exercise" based on "generic metrics and criteria concocted by a hodge-podge of interest groups." Ms. Peirce argued that ESG rules consume "tremendous amounts of corporate resources" and distract boards from value creation. For investors, she warned that ESG disclosures obscure material information and open the door to litigation, citing a case where "a throwaway line about the recyclability of coffee capsules" led to a $1.5 million penalty. (See related coverage.)

Ms. Peirce also criticized shareholder proposals from activists who "often own only a tiny percentage of company shares" but force companies into private ESG concessions that may harm long-term value. Ms. Peirce praised recent SEC steps to limit such proposals and called for a formal rule "embedding in the SEC rulebook an explicit commitment to materiality."

On international developments, she warned that Europe's ESG mandates risk spreading "economic malaise globally" and called for global regulators "to work as hard to dismantle the ESG regulatory edifice as they have in building it."