October 05, 2020

Corporate Financial Disclosures and Environmental, Social, and Governance Concerns: Evolving Issues

David McSweeney and Lisa Shelton

On January 30, 2020, the U.S. Securities and Exchange Commission (SEC) issued a proposed rulemaking designed to “Modernize and Enhance” Regulation S-K, with a stated intent to eliminate duplicative disclosures for the benefit of investors and simplify filings for registrants. See Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, 85 Fed. Reg. 12,068 (Feb. 28, 2020). Not all SEC Commissioners were in complete agreement with key provisions of the proposed action. In fact, in a concurrently issued statement, Commissioner Allison Herren Lee criticized the proposed rulemaking’s failure to address matters associated with certain environmental, social, and governance (ESG) concerns, specifically calling out the issue of climate change. Going further, the SEC’s Investor Advisory Committee issued a report on May 20, 2020, that recommended the SEC adopt disclosure policies regarding ESG issues. In addition, the focus of ESG concerns were echoed in certain comments filed on the proposed rulemaking. For example, one notable set of comments came from the office of U.S. Senator Elizabeth Warren, who, among other matters, added that the current global COVID-19 pandemic exacerbates the purported need for explicit climate change requirements in the SEC’s reporting requirements. See Letter from E. Warren to Chairman Clayton (Apr. 28, 2020).

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