Capital Markets Newsletter: The ESG Edition in 2021

International Capital Markets Newsletter: The ESG Edition – June 2021 – Issue 4: SEC’s Recent Pronouncements on ESG and Other Recent ESG Initiatives:

That the meaning of “ESG” is no longer necessary and illustrates how these issues have become important to investors, public companies, international capital markets, and the US Securities and Exchange Commission (the “SEC”). Institutional investors remain focused on corporate governance and other long-term value creation policies, with a greater focus on environmental, social, and governance factors, including sustainability.

ESG-targeted funds have had an unprecedented impact, surpassing the COVID-19 pandemic in 2020 in a number of ways. For example, during the COVID-19 pandemic, the global flow of sustainable funds increased 88% in the fourth quarter of 2020 and in that period, 196 record sustainable funds products were launched, according to researcher Morningstar.

The States, mutual funds that claim to make sustainable investments, outperform their traditional peer-to-peer funds by 4.3 percentage points, according to Morgan Stanley, with average total returns of 4.3 percentage points and 0.9 percentage points. For investment funds.

At the same time, the pandemic poses significant social, economic, and reputational costs that can arise if companies do not address ESG issues, including climate change, systemic racism, worker safety, health and well-being, and resilience. From the supply chain. that respond to these developments. For these reasons, the SEC has highlighted ESG issues in several recent announcements, speeches, and other public statements, as well as in other regulatory bodies, as described in this update.

Recent SEC Statements on ESG

As part of a renewed focus on ESG issues, the SEC issued several statements and press releases in 2021 to improve ESG disclosure in SEC filings of publicly traded companies. On February 24, 2021, then-President Allison Herren Lee released a statement urging the SEC’s Treasury Department (“CorpFin”) to pay more attention to public disclosures related to the weather. that CorpFin assesses, inter alia

(i) the extent to which listed companies pay attention to the guidelines issued by the SEC in 2010 for listed companies in relation to existing climate change disclosures (the “2010 Guideline”);

(ii)compliance with disclosure obligations under federal security laws;

(iii) contacting public sector companies on these issues and

(iv) critical lessons on how the market currently manages climate-related risks. Interim President Lee said in his statement that the SEC will use the insights from the CorpFin review to update the 2010 guidelines to reflect developments over the past decade.

 Current and proposed ESG information structures

Any new SEC rules relating to climate change disclosure or other ESG issues will be based on the existing information framework and evolving market practices regarding ESG disclosure in the United States and around the world in recent years. As described in the 2010 guidelines, climate change and other risks associated with ESG factors may be relevant to a number of existing rules and regulations, such as detailed requirements on the company’s history, legal actions, risk factors and analytical requirements and discussion by administration (MD&A) of Regulation SK. However, much recent and current ESG information is descriptive and historical in nature, and accountability has recently increased through the use of goals and other metrics to demonstrate a company’s progress toward meeting its ESG goals.

The Financial Disclosure Task Force on Climate Change (TCFD), created by the Financial Stability Board (FSB) in 2015 to develop consistent information on financial risks that can be used by businesses, banks, and investors to provide information to interested parties, published year an assessment. recommends companies, including

(i) the criteria and objectives used to assess and manage significant risks and opportunities for the climate where such information is relevant and

(ii) the objectives defined by the organization; described, used to measure risks and opportunities related to climate and performance objectives.

14 A growing number of public companies in the United States have already launched forward-looking initiatives on climate change and diversity, including targets and other measures, regularly on a dedicated page on their corporate website and sometimes around a limited liability holding company. SEC reports.

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