(Courtesy of the SEC)
A U.S. Securities and Exchange Commission initiative aimed at updating corporate disclosure requirements is attracting strong interest from many stakeholders who believe such changes are long overdue. Among the most interested observers, according to Davis Polk & Wardwell corporate partner Betty Moy Huber, are proponents of better reporting on sustainability initiatives.
“Arguably, the SEC’s disclosure reform initiative could not have come at a better time for sustainability and environmental groups who have been working for years to achieve better corporate sustainability disclosure,” writes Huber, who serves as co-head of Davis Polk’s environmental practice group, in a post Sunday published Sunday on the Harvard Law Forum on Corporate Governance and Financial Reporting. “But, will these sustainability groups succeed in finding common ground with the SEC and, if necessary, convince the SEC that sustainability issues are material or otherwise a priority?”
From Huber’s perspective, the answer to that question could go one of two ways.
On the “yes” side, she writes, the prominence and influence of entities such the Sustainability Accounting Standards Board— whose members include former SEC chair Mary Schapiro and ex-New York City mayor Michael Bloomberg—and sustainability advocacy group Ceres has helped build consensus about the importance of increased corporate disclosure with regard to sustainability and climate change issues. At the same time, she adds, the threat of climate change has grown to the point that it can be seen as something ordinary investors should consider material.
Says Huber: “These groups are pushing forward their conviction that sustainability disclosure is material and what all reasonable investors need to know to make an informed investment decision.”
On the other hand, some SEC commissioners, including chair Mary Jo White, have indicated in some instances that the disclosure reform initiative currently underway at the agency should not be driven by arcane special interests and should be focused mainly on streamlining disclosure rules.
Along those lines, Huber specifically mentions SEC commission Daniel Gallager, who has said that the agency’s rulemaking process surrounding, for example, the conflict minerals disclosure rule are “distractions” and “ill-advised anomalies.”
“If the SEC views the calls for sustainability disclosure to be politically motivated, unnecessary, or obfuscatory in any particular context,” Huber writes, “then the SEC may not have much patience for investors advocating for the same.” And because the commission also has yet to plow through the whole workload created by the Dodd-Frank Act, it may still disappoint some sustainability reporting advocates.
Huber’s post is based on an article she authored that first appeared in the American Bar Association’s Environmental Disclosure Committee newsletter.