At an Investor Advisory Committee ("IAC") meeting, SEC Commissioner Allison Herren Lee recommended improving environmental, social and governance ("ESG") disclosure. She also called for more ESG data collection and disclosure in the private placement markets.
IAC members discussed two uses of ESG data for investment and capital allocation decisions: (i) the data that companies use to make operational decisions and (ii) the data that investors use to make investment decisions. Ms. Lee noted the importance of ESG data for certain investors, observing that these investors seek to put their money into companies that practice sustainability, ethical standards and good governance. She called on the SEC to update 2010 guidance on disclosure in order to address climate-related risks.
Separately, Ms. Lee raised concerns regarding the lack of information on Regulation D offerings. According to Ms. Lee, the SEC lacks "visibility into this market" as a result of not having finalized amendments proposed in 2013 following the elimination of the prohibition on general solicitations. Ms. Lee argued that by finalizing the proposal, the SEC will have more data to assess existing exemptions, and to be able to better address additional related rulemakings.
Commentary Steven Lofchie
The SEC should be careful not to suggest that ESG investing is inherently a good strategy. Even a quick internet search on the topic suggests that viewpoints on the past investment success of ESG funds differ markedly. Further, past performance is no guarantee of future results. The SEC should take care not to put itself in the business of providing strategic investment advice.
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