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February 25, 2021 TO: ICI MembersESG Advisory Group
ESG Task Force SUBJECTS: ESG RE: ESG Update: SEC Acting Chair Lee Statement and IOSCO Report
On February 24, Acting Chair Allison Herren Lee issued a public statement directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings. She indicated that:
the staff will review the extent to which public companies address the topics identified in 2010 [Commission] guidance to public companies regarding existing disclosure requirements as they apply to climate change matters, assess compliance with disclosure obligations under the federal securities laws, engage with public companies on these issues, and absorb critical lessons on how the market is currently managing climate-related risks. The staff will use insights from this work to begin updating the 2010 guidance to take into account developments in the last decade.… Ensuring compliance with the rules on the books and updating existing guidance are immediate steps the agency can take on the path to developing a more comprehensive framework that produces consistent, comparable, and reliable climate-related disclosures.[1]
Also, on February 24, IOSCO announced that it is engaging with the IFRS Foundation on establishing a Sustainability Standards Board (SSB) with a strong governance foundation. The key elements are summarized immediately below.
- Scope. Given the urgency of the climate challenge, IOSCO supports a “climate first” approach in the near term. However, the IFRS Foundation should also move forward quickly to develop standards covering other sustainability topics.
- Materiality. IOSCO encourages a “building blocks” approach to establishing a global sustainability reporting system. This would provide a consistent and comparable baseline of sustainability-related information that is material to enterprise value creation, while also providing flexibility for coordination on reporting requirements that capture wider sustainability impacts.
- Leverage existing standards. IOSCO encourages the SSB to leverage the content of existing sustainability-related reporting frameworks and specifically points to the alliance of leading sustainability reporting organisations and their prototype for an approach to climate-related disclosures building on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and adopting the form and structure of the IFRS Foundation’s financial reporting standards.
- Expert committee. IOSCO is exploring the establishment of a multi-stakeholder expert consultative committee within the IFRS Foundation structure. Such a committee could help the SSB identify relevant sustainability topics that may be material to enterprise value creation, while also supporting mechanisms to coordinate investors’ information needs on wider sustainability impacts, as well as facilitating, coordinating, and promoting consistency in complementary jurisdiction-specific reporting standards.[2]
Dorothy M. Donohue
Deputy General Counsel - Securities Regulation
endnotes
[1] See Acting Chair Allison Herren Lee, Statement on the Review of Public Company Disclosure, available at https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure. See also Commission Guidance Regarding Disclosure Related to Climate Change (February 2, 2010), available at https://www.sec.gov/rules/interp/2010/33-9106.pdf
[2] The press release is available at https://www.iosco.org/news/pdf/IOSCONEWS594.pdf