SEC Should Mandate ESG Disclosure Limited to Matters that Directly Affect the Firm’s Cash Flows
Any ESG disclosures that financial regulators mandate should be limited to matters that directly affect the firm’s cash flows. Further, when issuer filings include ESG ratings, those filings should include information about the raters, the factors used, and the weights on the factors.
We recommend that the SEC should not mandate disclosure of the firm’s impacts on environmental and social (E&S) outcomes. Such disclosures lie outside the SEC’s statutory mandate and outside the SEC’s expertise.
Our recommendations balance the benefits of disclosure under the SEC mandate against the costs that arise from measurement, regulatory overreach, and forestalling private efforts ongoing in this area.
