A group of investors representing more than $5 trillion in assets under management petitioned the U.S. Securities and Exchange Commission on October 1, 2018 to develop a comprehensive framework that would require public companies to disclose environmental, social and governance (ESG) aspects relating to their operations. Petitioners include CalPERS, the New York State Comptroller and the U.N. Principles for Responsible Investment. The 19-page petition, available here, cites increasing demands by certain investors for information to better understand the long-term performance and risk management strategies of public companies. The petition notes that the voluntary “sustainability reports” that some companies have produced in response to these demands are insufficient and instead, an SEC-mandated comprehensive framework for clearer, more consistent and more fulsome, reliable and decision-useful ESG disclosure (above and beyond existing SEC disclosure requirements) would meet this demand. The petition does not lay out a framework for the SEC to consider other than a suggestion that the climate risk disclosure framework issued by the FSB’s Task Force on Climate-Related Financial Disclosure could be used by the SEC “as a starting point in promulgating its own Framework for comprehensive ESG disclosure.”
The petition comes on the heels of Senator Warren’s September 14, 2018 bill, the Climate Risk Disclosure Act, which if passed, would require the SEC to issue rules requiring public companies to disclose climate change-related risks, including climate change scenario analyses similar to those called for by the FSB Climate Task Force referenced in the petition, as well as companies’ direct and indirect greenhouse gas emissions, the total amount of fossil fuel-related assets they own or manage and their management strategies related to physical risks posed by climate change. The Senate bill is available here.