In March 2021, the then-acting chair of the Securities and Exchange Commission (SEC) solicited public input on the current state of climate change reporting for public companies and what steps the SEC should take to ensure that investors are adequately informed about climate risks. The SEC is expected to soon propose a rulemaking that mandates a certain level of climate change reporting for all public companies listed in the United States.
The SEC’s request for information and expected rulemaking occur as investor demand for enhanced climate change disclosures has grown significantly over the last decade. Along with other regulators around the world, the SEC is prioritizing the development and implementation of a standardized reporting regime for climate risks. Although many public companies are disclosing more about climate change than they were in 2010, when the SEC adopted Commission-level guidance regarding climate disclosure,1 the SEC has made clear it believes the current principles-based approach employed in the 2010 guidance is insufficient and can only be remedied through mandated disclosure.
A niche industry of standard setters, third-party assessment providers, quasi-governmental bodies, nongovernmental organizations (NGOs), and others have also greatly influenced the way companies share this information and whether it is included in SEC filings or in voluntary sustainability or corporate social responsibility (CSR) reports. Public companies have had to navigate a complicated web of disclosure expectations, and little consensus exists regarding the role and authority that regulators such as the SEC have in mandating specific disclosure requirements related to climate change.
Climate change disclosures are typically viewed under the broader lens of environmental, social, and governance (ESG) disclosures. ESG is a frequently used but malleable term that encompasses climate change as well as an increasingly broad set of issues. While regulators and market participants sometimes use the terms climate change and ESG interchangeably, the SEC is expected in the coming months to issue rulemakings involving other topics under the ESG umbrella.
CLIMATE CHANGE / ESG SURVEY
The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (CCMC), Nasdaq, Nareit, The Real Estate Roundtable, National Investor Relations Institute, TechNet, BIO, and Silicon Valley Leadership Group have partnered to conduct a survey to learn more about current practices and the outlook for climate change and ESG reporting from the public company perspective. A total of 436 companies participated in the survey, with respondents encompassing a wide spectrum of roles including CEO, CFO, corporate secretary, general counsel, chief sustainability officer, investor relations, and corporate communications.
Notably, survey respondents represent a broad cross-section of industries and range from small to large in terms of market capitalization. In fact, 67% of survey respondents have less than $5 billion in market capitalization, including 32% below $700 million. We believe it is critically important that the views of these companies be heard by policymakers given that regulatory burdens have historically had a disproportionate impact on smaller issuers.
This survey is intended to inform policymakers as they consider the impacts that new mandates for climate change and other ESG disclosures would have on public companies and their shareholders
