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SEC’s ESG Balancing Act: Investor Needs vs. Company Hassles

June 4, 2021, 7:52 PM

Expanding climate reporting rules to address the competing concerns of public companies and their shareholders won’t be an easy task, but the Securities and Exchange Commission aims to try, an official said Friday.

“We have a great opportunity here to help to improve the disclosure system to benefit both issuers and investors. The trick of course is in how we do that,” said Kristina Wyatt, senior counsel for climate and ESG to the Division of Corporation Finance. “Help investors to get the consistent, comparable, decision-useful and reliable information they need while also trying to minimize the burden on issuers.”

  • Wyatt, who was addressing an accounting conference, said changing investor expectations have blurred the line between financial statement materiality and other types of materiality. “Your impact on the world in these areas ultimately will impact your financial performance,” she said, “because of the demands of investors and customers and other stakeholders.”
  • The SEC has requested feedback on how it could bolster the information that companies report on a range of environmental, social and governance, or ESG, factors. Chairman Gary Gensler has said the commission would focus on climate change and workforce disclosures initially. In the meantime, staff are reviewing existing disclosures and how companies factor climate risks into their financial reporting based on existing accounting rules.
  • Wyatt spoke a day after Commissioner Elad Roisman said that any material information should already be disclosed to investors in routine filings under existing rules and warned of the costs that public companies would bear in complying with new reporting mandates. He and Commissioner Hester Peirce have questioned the need for expanded reporting.

To contact the reporter on this story: Amanda Iacone in Washington at aiacone@bloombergtax.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; David Jolly at djolly@bloombergindustry.com

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