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How often does this happen? SEC Commissioners Allison Lee (D) and Elad Roisman (R) on the same page? Ok, well, maybe they’re just on the same fragment of a sentence, but still….  Bloomberg is reporting that, at the WSJ’s CFO Network Summit, Lee expressed her view that companies’ compliance with any new SEC disclosure requirements on ESG should not be subject to “gotcha” enforcement, instead indicating that companies will be cut plenty of slack in experimenting with any new ESG rules that the SEC may adopt.   She also offered several suggestions that, interestingly, were quite consistent with suggestions made last week by Roisman to mitigate the cost of compliance.

According to Bloomberg, she rejected the idea that ESG disclosure rules will involve “some kind of gotcha where we come up with a rule, and two months later, we’re knocking on your door.” Lee also confirmed that, in her view, companies should have the opportunity to experiment with ESG disclosures and “be given time to learn from their peers and get their ESG reporting right.” She advocated that the SEC phase in disclosure requirements gradually over time or “deploy a safe harbor to help companies with compliance.” Is this a signal that we should expect the SEC’s new proposal on ESG disclosure to provide a phase-in, reasonable latitude, and probably even a safe harbor for complying companies?

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In remarks last week before the ESG Board Forum, Roisman—clearly not a fan of ESG disclosure requirements—suggested some ways to tailor them to ease the burden and cost of compliance.  Among his suggestions: scale the disclosure requirements for smaller companies; have reasonable expectations for “what companies can disclose and how they disclose it”; include a safe harbor for good faith efforts to provide the required information; categorize the required disclosures as “furnished” to the SEC, not “filed”; and provide a long phase-in and extended implementation period. Of course, even if new rules include all of these suggestions, that doesn’t mean that Roisman would vote in favor. After all, he thinks that ESG disclosure requirements are practically superfluous because the SEC’s disclosure framework already requires companies to disclose information that is material to investors, and that includes ESG information. Not to mention that ESG information is hard to standardize—one of the goals frequently touted of the SEC’s adopting ESG disclosure requirements—because it “is inherently imprecise, relies on underlying assumptions that continually evolve, and can be reasonably calculated in different ways.  And ultimately, unless this information can meaningfully inform an investment decision, it is at best not useful and at worst misleading.”  (See this PubCo post.)

Posted by Cydney Posner

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