Environment, social and governance (ESG) issues have become more prominent, creating increased pressure on governments, corporations and individuals to respond. ESG is a divisive topic within the private funds industry, however, and there is no consensus on its scope or how ESG factors should be measured. The SEC’s potential role in overseeing fund managers’ ESG practices is also a live issue that is sparking debate within the Commission itself. Recent remarks from SEC Chair Gary Gensler, as well as Commissioners Allison Herren Lee, Hester M. Peirce and Elad L. Roisman, reflect their personal views rather than the SEC as a whole but nevertheless spotlight sharp divisions in the agency as to whether the SEC can – or should – implement an ESG disclosure framework. Although the Chair and each Commissioner prioritized investors and emphasized the SEC’s mandate, they disagreed about the extent to which ESG reporting would serve or further the SEC’s mission. This first article in a two-part series details the arguments raised by Peirce and Roisman, including ten theses for why SEC-mandated ESG disclosure requirements are inappropriate. The second article
will summarize Gensler’s and Lee’s counterarguments for an increased role for ESG in corporate governance efforts, including mandatory climate risk disclosure rules and directors’ duties to consider ESG factors. For additional coverage of SEC speeches, see “SEC Officials Clarify the Commission’s Stance on ESG Investing and the Role of Disclosure
” (Oct. 15, 2020); and “Understanding the Wells Process: SEC Enforcement Staff Views of the Process (Part Two of Three)
” (Jun. 20, 2019).