Earlier this week, the Securities and Exchange Commission (SEC) announced that its Investor Advisory Committee (IAC) will be holding a meeting on Thursday, November 7, 2019, at 9:30 a.m. E.T. The agenda includes a morning discussion on whether and how investors use environmental, social and governance (ESG) data in their investment and capital allocation decisions. The agenda and press release provide no further details on the session topic other than the panelist list provided below.
SEC Chairman Clayton has raised a similar question at prior IAC meetings on human capital management (HCM) as the one posed for the November 7, 2019 meeting. As a category of ESG-related data, HCM encompasses matters such as how companies manage their workforce relationships including training, talent development and retention.
Chairman Clayton has explained that investors’ perspectives, along with other information and considerations, help inform the SEC’s rulemaking decisions and the guidance the agency provides. In his opening remarks to the IAC meeting on March 28, 2019 on HCM disclosure, the Chairman posed, “[W]hat questions do investors—those who are making investment decisions—ask about human capital? For example, how do investors use human capital information to make relative capital allocations among similar organizations? Armed with general and sector-specific answers to these questions, [the SEC] can better craft rules and guidance.”
The SEC is currently considering whether to replace the existing requirement to disclose only the number of employees with a description of the company’s human capital resources. Specifically, on August 8, 2019, the SEC proposed amendments to Item 101 (business operations) of Regulation S-K soliciting comments on whether companies should be required to disclose human capital-related objectives or measures that management believes is material to an understanding of the company’s business, as described in a prior client memorandum. While Chairman Clayton has distinguished the ripeness of potential regulation for human capital information from other types of ESG data, the November 7 meeting could produce additional information that is relevant to one or more types of ESG objectives or measures.
The panelists currently scheduled for the November 7, 2019 meeting consist primarily of ESG-focused investors:
- Jonathan Bailey, Head of ESG Investing, Neuberger Berman;
- Satyajit Bose, Associate Director and Associate Professor of Practice Program in Sustainability Management, Columbia University;
- Michelle Dunstan, Portfolio Manager, AllianceBernstein;
- Rakhi Kumar, Senior Managing Director, Head of ESG Investments and Asset Stewardship, State Street Global Advisors; and
- Jessica Milano, Vice President and Director of ESG Investment Research, Calvert Research and Management.