Tuesday, November 17, 2020
SEC Commissioner Allison Herren Lee recommended the SEC ought to take into account standardized guidelines and laws for governing socially accountable investing. In her speech, entitled “Taking part in the Lengthy Sport: The Intersection of Local weather Change Threat and Monetary Regulation”, Ms. Lee asserted that the SEC ought to tackle standardized reporting with respect to local weather threat, in addition to a normal framework of insurance policies and procedures for monetary companies establishments that help shoppers with environmental, social and governance (ESG) investments.
In her feedback, Commissioner Lee in contrast local weather change threat to the present COVID-19 pandemic, suggesting that local weather change “looms even bigger than the pandemic and will have much more grave human and financial price”. In assessing the urgency to behave now, she acknowledged that “we should always not anticipate local weather change to make its approach from scientific journals, financial fashions and information protection of local weather occasions immediately into our day by day lives, and people of our youngsters and theirs. We will come collectively now to concentrate on options”.
Whereas she admitted that the SEC is just not essentially the company best-equipped to fight local weather change, Commissioner Lee set forth the “three pillars of oversight” of the SEC, stating that “we shield traders, facilitate capital formation, and keep honest, orderly and environment friendly markets”. She recommended that the SEC must act as a result of “[t]listed below are quite a few methods wherein the dangers and alternatives arising from local weather change intersect with our monetary markets and people three pillars of oversight”. With a purpose to oversee the dangers to monetary markets from local weather change, Lee means that there needs to be “uniform, constant and dependable disclosures” from monetary establishments, public corporations, funding advisors, asset managers and different market contributors. Lee suggests that every one of those entities ought to work collectively “towards a disclosure regime particularly tailor-made to make sure that monetary establishments produce standardized, comparable and dependable disclosure of their publicity to local weather dangers, together with not simply direct, but in addition oblique, greenhouse fuel emissions related to the financing they supply”.
Lee seeks to create commonplace insurance policies and procedures concerning disclosures associated to ESG investing as a result of traders want extra exact info on ESG elements. Lee opined that their must be standardization within the ESG space, asserting that “disclosure on this space is vital, and funds and their advisers have to be clear about what they imply once they use these or related phrases to explain a fund’s principal methods or dangers”.
Lee seeks public enter on how the SEC may oversee funding advisers method to ESG investing, together with how an adviser could assess and/or implement ESG elements to appropriately implement a consumer’s needs with respect to their investments, in addition to their train of shareholder voting rights. The complete textual content of Lee’s November 5, 2020 speech to the Practising Regulation Institute might be discovered right here.
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