SEC Committee Discusses ESG Disclosure Requirements and D&I

On March 19, 2021, the SEC’s Asset Management Advisory Committee (AMAC) held a meeting to discuss the December 2020 potential recommendations that its ESG Subcommittee provided to the SEC on ESG disclosure requirements. During the meeting, the Diversity & Inclusion (D&I) Subcommittee of AMAC also made potential recommendations to improve D&I in the asset management industry.
Continue Reading

SEC Signals Support for Single Global ESG Disclosure Framework

Today, the SEC released a statement by Division of Corporation Finance Acting Director John Coates on ESG disclosure. In this post, we provide our observations on what his statement may indicate about the direction of globally coordinated efforts on ESG disclosure.

Acting Director Coates is interested in developing global ESG disclosure standards, stating that the SEC “should help lead the creation of an effective ESG disclosure system.”
Continue Reading

Davis Polk Client Memo: SEC Establishes Enforcement Division Climate and ESG Task Force

Yesterday, the Securities and Exchange Commission announced a newly created Climate and ESG Task Force in the Division of Enforcement. The announcement is a reminder for public companies, investment advisers and funds to prepare for increased enforcement scrutiny regarding ESG disclosures, plans, and investment products. The new task force also is the latest signal of an effort to portray an SEC enforcement program that is both more aggressive and increasingly focused on specific policy objectives.
Continue Reading

SEC Chair Nominee Gensler and SEC’s 2021 Examination Priorities Highlight ESG and Climate Risk

SEC Chair Hearing.  Yesterday, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a nomination hearing to consider Gary Gensler’s candidacy for Chair of the Securities and Exchange Commission, or SEC. Throughout the hearing, Gensler fielded numerous questions on environmental, social and corporate governance and disclosure matters. This post synthesizes the most salient points from his testimony.
Continue Reading

Davis Polk Client Memo: Federal Reserve Finalizes Board Effectiveness Guidance for Large Financial Institutions

The Federal Reserve’s final guidance on board of directors’ effectiveness (Board Effectiveness Guidance) is a key milestone in its multi-year review of the practices of boards of directors, particularly at the largest banking organizations.  This memorandum describes the final Board Effectiveness Guidance and highlights key changes from the proposal.  It also describes its interactions with fiduciary duties and listing requirements.
Continue Reading

Davis Polk Client Alert: SEC to Review Climate-Related Disclosure

Yesterday, the SEC released a statement on climate change disclosures. The statement directs the SEC staff to review company disclosures against its 2010 climate change disclosure guidance. In light of these events, this client alert provides our prior comprehensive summary of the SEC’s 2010 guidance and identifies what issuers should do in the short and long term to be prepared for future regulatory action.
Continue Reading

ISS Issues 2021 Governance QualityScore Methodology Updates

On February 8, 2021, ISS announced the updated methodology guide the firm uses to determine a company’s Governance QualityScore (GQS), its proprietary rating system designed to help institutional investors assess companies for governance quality and risk. Seventeen new factors have been added, which ISS states is the largest GQS methodology release in recent years.

What GQS Measures

GQS is a decile-based score meant to indicate the corporate governance risk relative to other companies in a respective index or region.
Continue Reading

BlackRock’s 2021 CEO Letter – What It Means for Public Companies, Issuers of Public Debt, Large Private Companies, and Their Boards

Yesterday, BlackRock released its annual Letter to CEOs, which is also commonly referred to as the “Fink Letter.” With the firm managing approximately $9 trillion in assets, this open letter is widely read by public companies, market participants and other stakeholders to better understand the mega investor’s outlook. This post boils down BlackRock’s 2021 letter to what we think is its essence.
Continue Reading

SEC Extends Review Period for Nasdaq’s Board Diversity Proposal

On the heels of our post of our summary deck yesterday on Nasdaq’s December 2020 Board Diversity Proposal, the SEC announced last night that it needs more time to consider Nasdaq’s proposal and associated comment letters.  With the extension, the SEC has until March 11, 2021 to either approve or disapprove the proposal, or institute proceedings to aid its determination.  
Continue Reading

Nasdaq’s Board Diversity Proposal

The SEC continues to consider and take public comment on Nasdaq’s December 2020 Board Diversity Proposal. That proposal, if approved as written, would require Nasdaq-listed issuers to disclose their board diversity composition annually and eventually have two “diverse” directors on their boards, or explain why not. Limited exceptions would also apply.

There’s been much speculation as to whether the SEC will approve these proposed amendments to Nasdaq’s listing requirements, decline to do so, or propose, at some point in time, its own board diversity disclosure requirements.
Continue Reading

LexBlog