SEC Commissioner Urges Regulatory Restraint in Sustainability Disclosure
Commentary by Steven Lofchie
SEC Commissioner Mark T. Uyeda criticized requiring corporate issuers to provide sustainability reporting, warning against financial regulators functioning as policy activists by mandating disclosures that are not materially relevant to investors.
In remarks at the 2025 Japan–U.S. Symposium, Mr. Uyeda warned that regulatory overreach can limit the development of new ideas. He argued that financial regulators should not restrict innovation, or shape market behavior through indirect pressure, or pursue non-financial aims within the regulatory framework. He emphasized that an open and flexible marketplace is essential to supporting innovation, healthy risk-taking, and the capital formation that drives economic growth.
Mr. Uyeda applied this principle directly to sustainability disclosure, cautioning against expansive environmental, social and governance ("ESG") mandates that go beyond what is relevant to investors. He noted that sustainability information may be important when it affects a company’s business or financial condition, but he also warned that broad, policy-driven expectations can impose heavy reporting costs, divert management attention, and push companies toward objectives better addressed by environmental regulators. Mr. Uyeda stressed that financial regulators should avoid embedding broad environmental aspirations into corporate reporting frameworks.
Commentary
Can anyone demonstrate that sustainability disclosures that were not material to an issuer's investors have created some desired and long-term change in behavior? As Commissioner Uyeda indicates, if it is desirable to have a change in environmental conduct, that change should be driven by Congress and the environmental regulators. Forcing issuers to make disclosures of issues that are not relevant to investors is more likely to discourage issuers from going public than they are to change environmental conduct.