One of the basic questions the Securities and Exchange Commission (SEC) is seeking to answer is whether environmental, social, and governance risks are material—that is, do ESG-related risks directly affect a company’s bottom line? Another is whether the SEC should align required disclosures with an established ESG framework, akin to regimes being developed by regulators in the United Kingdom and European Union.
If the SEC writes rules that order public companies to disclose ESG-related risks in the areas of climate change, board diversity, corporate political donations, ethical supply chain procurement, and more, should the agency establish its own ESG framework on which those disclosures would be based? Or should it simply peg them to established ESG standards, like those being developed by the International Financial Reporting Standards Foundation?
