At an Asset Management Advisory Committee ("AMAC") meeting, SEC officials considered a subcommittee's proposed recommendations on environmental, social, and governance ("ESG") disclosure.
Division of Investment Management Director Dalia Blass questioned whether it is appropriate to recommend different issuer disclosures for ESG material risks than for other potential areas of risk. In relation to the ESG Subcommittee's disclosure recommendations, Ms. Blass identified the following areas of concern:
the potential reliance of the SEC on non-SEC unregulated third-party standard setters in the ESG area;
the role of disclosure liability in mandated ESG disclosures; and
the different types of disclosures that might be required for different types of issuers and for advisers as opposed to issuers.
Commissioner Hester M. Peirce emphasized that including ESG considerations in investing does not require the SEC to upend its rules any more than with other genres of investing. Ms. Peirce described the conceptual challenges raised by ESG and proposed requirements as "amorphous" and susceptible to "manipulation" and variable interpretations. Ms. Peirce disagreed with the comparison of ESG disclosures to GAAP principles, stating that securities disclosures cannot be effective in aiding the capital markets to resolve their issues if they are utilized "as a forum for social and political discussion."