The SEC Investor Advisory Committee reviewed the current state of sustainability reporting and a modernization for the reporting framework for mutual funds and other investment companies.
SEC Chair Mary Jo White reminded investors to provide comments on two recent SEC rule proposals focusing on certain disclosures required of broker-dealers and companies. The proposals are intended to increase order routing transparency for institutional and retail investors, as well as eliminate outdated, redundant or superseded disclosure requirements.
Chair White stated that while she is "encouraged by the significant progress that has been made on voluntary disclosures about these issues – e.g., 90 percent of the world's 250 largest companies voluntarily reported on sustainability standards last year . . . a number of important and persistent topics remain," including materiality and the role of shareholder advocacy and proposals. Chair White asked investors to contribute to this discussion by commenting on the SEC's recent Regulation S-K concept release, which questions whether and where investors would benefit from additional disclosure on sustainability issues.
Chair White also discussed the SEC's proposed enhancements to modernize the existing investment company reporting framework, which she stated "if adopted, would vastly improve the type and format of the information that funds provide to the Commission and investors." In particular, Chair White said she was looking forward to the Committee's discussion of the use of both paper and websites to make certain of the disclosures required of funds.
Commentary
According to Chair White, a very broad range of topics is included within the scope of sustainability reporting. As the Chair further noted, all such issues must be discussed and disclosed to the extent that they are material to a company's financial condition or the result of operations. In this respect, so-called sustainability issues are no different from any other issue. The question that then arises is whether there are other areas in which sustainability reporting disclosure is different; i.e., is there an underlying suggestion that issuers should be required to discuss "sustainability issues" (and how they are to be defined) even when they are not material to an issuer's investment prospects?
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