SEC Head Looking into Disclosure Rules for ESG Investment Products

A Brief Summary

The U.S. Securities and Exchange Commission's (SEC) Chair Gary Gensler said that it is looking into regulating ESG investment products, including disclosures for fund managers relating to the criteria and data used for ESG, green, or sustainable labelled products.

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The chairman of the SEC, Gary Gensler, recently took to Twitter and said: " the SEC is looking at climate risk disclosure.". Before he took to Twitter, Observers still did not know when to expect a proposed rule from the SEC. However, his latest comments on the social media platform throw some light on what might be included in the SEC's new regulation.

Gensler said climate disclosures are a must for investors. "Investors representing trillions of dollars are looking for more consistent, comparable, & decision-useful info about the climate risk of companies in which they invest." Investors, activists and academicians are showing increasing interest in climate disclosure requirements, and they are closely monitoring what companies are disclosing. 

He said that 3 out of the four comments received supported mandatory climate risk disclosure rules, and this is in response to last year's request for public comments on what might be part of a proposed SEC rule. Many attorneys generals representing California and New York came in with support that called on the SEC to mandate ESG disclosures for climate-related financial risks. 

According to Gensler, the following is an overview of what he believes the SEC's disclosures might be like:

• They should be consistent and comparable.
• The SEC will consider whether the disclosures should be filed in the form of 10-k.
• The disclosures should provide details on quantitative and qualitative aspects, so it helps the investors gain information.

Gensler also said: " I believe mandatory climate risk disclosure would represent significant progress, requiring companies to assess climate risks & collect & publicly disclose relevant metrics for the first time & giving investor info they've needed for years."

However, the chairman did not comment on when a proposed rule on climate-related financial risk would be released. It was scheduled for release in October last year but later got delayed. It is widely speculated that it takes some time for the rules to get in shape and does not begin to take effect until 2023.