Last week, one of the primary topics at the July 7th meeting of the SEC's Asset Management Advisory Committee was ESG disclosures. Indeed, according to the discussion draft of the relevant subcommittee, certain specific recommendations were made:

  • that "the SEC take steps to foster meaningful consistent, and comparable disclosure of material environmental, social, and governance (ESG) matters by issuers"
  • that the SEC "encourage issuers to adopt a framework for disclosing material ESG matters and to provide an explanation if no disclosure framework is adopted" as this would "foster meaningful, consistent, and comparable disclosure"
  • that "the SEC initiate a study of third-party ESG disclosure frameworks for the disclosure of material ESG matters to assess whether the frameworks could play a more authoritative role in the future"

(https://www.sec.gov/files/amac-recommendations-esg-subcommittee-070721.pdf)

SEC Chair Gensler (https://www.sec.gov/news/public-statement/gensler-amac-2021-07-07), and Commissioners Crenshaw (https://www.sec.gov/news/public-statement/crenshaw-amac-remarks-070721#_ftn5) and Pierce (https://www.sec.gov/news/public-statement/peirce-amac-remarks-070721), also delivered remarks concerning the pertinence of ESG disclosures, among other things.

Notably, there was considerable debate over the relative merits of relying on third-party ESG disclosure frameworks, with Republican Commissioner Pierce questioning "whether the consequent power--both financial and regulatory--of these standard-setters raises concerns."

It seems probable, based on this latest development and prior remarks (https://insights.mintz.com/post/102h1kt/sec-chairman-gensler-re-affirms-focus-on-climate-change-disclosures), that the ESG disclosures that will be promulgated by the SEC will feature some elements of third-party disclosure frameworks. However, the degree to which such disclosures will rely on such frameworks--and which third-party frameworks will be utilized, although the TCFD appears to be most frequently cited--remains to be seen.

The meeting will include a discussion of matters in the asset management industry relating to: (1) the ESG, Diversity & Inclusion, and Private Investments Subcommittees, including potential recommendations from those Subcommittees; and (2) the Evolution of Advice Subcommittee, including a panel discussion.

 https://www.sec.gov/news/press-release/2021-119