July 19, 2022
The comment period has closed for the Securities and Exchange Commission’s (SEC) proposed Climate Change Disclosure rule. During the 90-day comment period that expired in mid-June, the Commission received more than 10,000 comments. The commenters include many large industry and investor groups such as the American Chemistry Council, Black Rock, Global Reporting Initiative, ISS, Moody’s, Morningstar, Risk Management Association, State Street, U.S. Chamber of Commerce, The Vanguard Group and World Business Council for Sustainable Development.
The Society for Corporate Governance submitted a 94-page comments letter and the National Investor Relations Institute provided 13 pages of comments. We highly recommend both comment letters to our ESG, corporate governance and investor relations contacts.
The SEC is currently targeting October 2022 to issue a final rule, which seems unlikely and will undoubtedly result in extensive legal maneuvers.
Not as high profile are several other ESG-related rulemaking projects that are at the proposal and comment stage:
- Cybersecurity Risk Governance, for which there are two rulemaking projects – one to address public companies’ cybersecurity disclosures and the other to enhance investment firms’ disclosures and governance related to cybersecurity risks. The rulemakings were announced in March 2022 and are scheduled for completion in April 2023.
- Rules Related to Investment Companies and Investment Advisers to Address Matters Relating to Environmental, Social and Governance Factors, which would expand disclosure requirements for investment funds and advisers that market themselves as having an ESG focus. Funds claiming to achieve a specific ESG impact would be required to describe the specific impact(s) they seek to achieve and summarize their progress on achieving those impacts. The rulemaking was announced on May 25 and comments are due by August 16.
There are two other ESG-related rulemaking projects that are just getting started but will likely generate significant interest in the months ahead:
- Human Capital Management Disclosure proposed rule, which is scheduled to be issued in October 2022, at which time a public comment period will begin.
- Corporate Board Diversity, which is slated to issue a proposed rule in April 2023, at which time a public comment period would begin.
Our general advice on SEC rulemaking is to maintain a watchful eye, but do not hold back or accelerate your ESG disclosures based on what the SEC might do in six months or a year or more, provided it can clear all the regulatory and legal hurdles. Continue to stay focused on what matters most to your business and your stakeholders, while never underestimating the potential future impact of new SEC requirements.
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