Connect with us

Featured

ESG: Leaders have a role to play in ensuring disclosure

Allison Lee of the SEC expressed concern about the “backlog” of ESG disclosure that the United States has accumulated over the past decade. As to whether the Biden administration will be a “team player”, panelist Allison Lee, SEC Commissioner since 2019, suggested that ESG issues are “critical” and that “the [SEC] needs to become more involved – and quickly.”

Published

on

Two things are essential to the development of globally recognized standards for environmental, social, and governance (ESG) disclosure: greater U.S. participation and stronger regulatory guidance.

That is the general consensus expressed by the experts who recently participated in the Sustainability Accounting Standards Board (SASB) Symposium 2020, a virtual conference that brought together leading CEOs of investment firms and other industry representatives from around the world.

Read more about the Sustainability Accounting Standards Board Symposium 2020 and find the latest business headlines with our companion app Born2Invest.

The speakers agreed that ESG issues can pose material risks to investors and that markets must find a way to highlight these risks

In a panel discussion on non-financial disclosure, Erkki Liikanen, Chairman of the Board of the IFRS Foundation, said the time has come to address the fragmentation of ESG data and reporting. “We can no longer ignore this issue,” he said.

At the same panel, Alain Deckers of the European Commission noted that preventing greenwashing and confusion over disclosure requirements is paramount.

Erik Thedéen, chairman of the working group on sustainable financing of the International Organization of Securities Commissions, hypothesized that part of the reason the European Union seems to be so far ahead of the rest of the world on this issue is because “the United States is lagging behind.”

“The United States is not on board, so it is difficult to envisage a global solution,” he said. “Japan and Europe may agree, but the U.S. has to be on board.”

The global community is stepping up its actions, he noted, so it would be encouraging if the new U.S. administration is as “forward-looking” as it claims.

Former Securities and Exchange Commission (SEC) Chairman Mary Shapiro, who moderated the panel on non-financial disclosure, pointed out that the US regulator had not produced guidelines on climate risk disclosure since 2010.

As to whether the Biden administration will be a “team player”, panelist Allison Lee, SEC Commissioner since 2019, suggested that ESG issues are “critical” and that “the [SEC] needs to become more involved – and quickly.”

SEE ALSO  Most valuable lessons from Elon Musk

This message echoed the one she made in a January public intervention, when she lamented how the agency had chosen “to ignore the challenge of climate change risk disclosure rather than begin the difficult process required to address it.

During the roundtable discussion, Lee added: “We have learned a lot [since 2010] about climate change risks, and there has been a lot of progress in terms of the number of companies producing climate-related information. She attributed this to both past U.S. guidance and the ongoing work of groups such as the Task Force on Climate-Related Financial Reporting (TCFD) and the SASB.

Looking ahead, Allison Lee believes that “we have reached a sort of tipping point in terms of the effectiveness of a voluntary ESG disclosure regime. We have many specific demands from investors and evaluators, and issuers are currently producing information that is both competing and contradictory.”

In order to create standardized and reliable ESG and financial data, Allison Lee believes that regulators such as the SEC need to coordinate. “We could eventually integrate these data through a broad disclosure effort that would also recognize, as the TCFD and SASB do, the considerable differences between sectors and industries.”

Going down this road won’t be easy, she agreed, but there is already regulatory work being done globally and this will help the United States catch up and respond adequately to investor demand.

For all markets, however, the issue that remains topical is the multiplication of names and nomenclatures used in the ESG space.

This “creates problems for issuers, preparers [of financial reports] and investors,” Alain Deckers pointed out. Even the term “non-financial disclosure” has recently been called into question, as it seems to dissociate ESG issues from their financial impact.

In the main conference discussion, CFA Institute President and CEO Margaret Franklin and State Street Global Advisors President and CEO Cyrus Taraporevala stressed that the continuing confusion over industry standards will only “open doors for those who don’t believe in ESG issues.”

SEE ALSO  On celebrity writers: From Haruki Murakami to Stephen King

Nevertheless, Cyrus Taraporevala identified three encouraging trends: the growing awareness of the increasing correlation between ESG risks and performance; the increasing knowledge of investors; and the increased involvement of regulators such as the SEC.

__

(Featured image by Alexas_Fotos via Pixabay)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in FI, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.

Daphne Freeman has worked in the crowdfunding and impact investing industry for the past few years, gaining experience in marketing, and connecting businesses and entrepreneurs in need with the right investors. As a seasoned grant writer as well as financial market journalist, she is passionate about making a social impact in the world. A free spirit, Daphne also enjoys writing and exploring topics of interest, currently CBD, health and beauty, and social media influencers.