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BlackRock Releases Its 2020 Public Company Engagement Priorities

While managing COVID-19 related risks and impacts may be the current priority for many public companies, BlackRock provided a reminder yesterday that environmental, social and governance (ESG) issues will form a core part of its engagement strategy this proxy season.  Publishing its investment stewardship team’s public company engagement priorities for 2020 (Priorities), BlackRock stressed, among other things, that it intends to hold board directors accountable for demonstrating “material progress” on ESG-related disclosures and practices.

BlackRock’s 2020 Investment Stewardship Engagement Priorities

The Priorities place an enhanced focus on sustainability-related issues and disclosures. Moreover, the Priorities articulate key performance indicators against which the asset manager will track companies’ progress and identify those directors whom it will hold responsible for demonstrating progress on these issues. 
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SEC Chairman Releases Statement on Proposed Changes to Financial Reporting and Discusses Climate-Related Disclosure

Today, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) voted to propose amendments to certain financial disclosure requirements under Regulation S-K, specifically those requirements related to Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).  In addition to these proposed amendments, the SEC issued guidance for registrants to consider when using metrics and key performance indicators in their MD&A disclosures.  The press release announcing these developments explains that the proposals are part of an overarching effort by the SEC to improve and “modernize” the disclosure regime for the benefit of both investors and issuers.

SEC Chairman Jay Clayton issued a statement in support of the proposed amendments and related guidance, a statement that largely focuses on a topic that the Chairman himself notes is “not the particular focus of today’s Commission action” – environmental and climate-related disclosures.
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SEC Investor Advisory Committee Panel on ESG – Data, Disclosure and Materiality

Last Thursday, the SEC’s Investor Advisory Committee (IAC) held an open meeting, which included a session to discuss investor use of environmental, social and governance (ESG) data in their investment and capital allocation decisions. During this session, the IAC heard insights from and asked questions of a panel consisting primarily of ESG-focused investors, as well as one academic. The panelists represented investment management firms Neuberger Berman, AllianceBerstein, State Street Global Advisors and Calvert Research and Management, as well as Columbia University’s program in sustainability management.

SEC Chairman’s Written Comments

SEC Chairman Clayton was not in attendance, though he submitted written remarks to the IAC, expressing his views on the matters to be considered at the meeting.
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State Street’s New ESG Scoring Tool – Companies and ESG Raters Take Note

Introduction. Earlier this week, we learned that State Street Global Advisors, or SSGA, has created and is currently applying its new Environmental, Social, and Governance (ESG) platform, known as “R-Factor,” to better inform its investment, engagement, voting, and other decisions regarding any given company. SSGA says that it built R-Factor, its own scoring system, because it believes that the current ESG reporting and scoring landscape lacks standardization and transparency. Moreover, SSGA found that differing methodologies used by the current ESG raters can lead to a variance in company scores. These differences can be critical as asset owners and investment managers seek consistent, comparable and material ESG-related information for their investment analyses.
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Leading ESG Standard-Setters Release How-To Guide for Implementing TCFD’s Climate Risk Disclosure Recommendations

On May 1, 2019, the Sustainability Accounting Standards Board (SASB) and the Climate Disclosure Standards Board (CDSB) jointly released a how-to implementation guide for implementing the disclosure recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure (TCFD).  TCFD released its final recommendations in June 2017, and as of this post’s writing, 643 organizations have publicly expressed support.  Despite this level of support, companies have lacked, according to the CEO of The SASB Foundation, Madelyn Antoncic, a clear understanding on how to put the recommendations into practice.  It is for this reason that CDSB and SASB teamed up to develop a series of practical TCFD-focused resources, of which the implementation guide is the first.
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