ESG

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After months of anticipation, on March 21, 2022, the U.S. Securities and Exchange Commission (SEC) voted 3:1 to propose climate change-related disclosure rules that would impact a company’s annual reports and registration statements.   As indicated previously by the Staff, the proposed climate-related disclosure framework is modeled partially on the Task Force on Climate-related Financial Disclosure’s (TCFD) recommendations and draws upon the Greenhouse Gas (GHG) Protocol.  (See our previous blog post discussing the Staff’s consideration of TCFD). The proposed rules, seemingly unprecedented in nature, are significantly more prescriptive rather than “principles-based” disclosure rooted in materiality, and intended to provide stakeholders with “consistent and comparable data.”
Continue Reading The SEC’s Proposed Climate Change Rules Are Out: Making Sense of 500+ Pages

As investors, advisers, corporations and other stakeholders become increasingly focused on environmental, social and governance (ESG) investments and disclosures, regulators are becoming increasingly concerned with potential “greenwashing,” which Kelly Gibson, Chair of the Securities and Exchange Commission’s (SEC) ESG Task Force, defined as “exaggerating” a “commitment to, or achievement of climate . .  . related goals.”
Continue Reading The Not So Green-Friendly Practice of Greenwashing

Last month at the 2021 United Nations Climate Change Conference (commonly referred to as the COP26), the International Financial Reporting Standards Foundation (IFRS Foundation) announced the formation of an International Sustainability Standards Board (ISSB).
Continue Reading Consolidation and Globalization of ESG Standards Progress: CRD Dissolves to Support IFRS Foundation and ISSB

I recently co-authored an article for Corporate Counsel with Stephanie Bignon, assistant general counsel at Delta Air Lines, highlighting key environmental, social and governance (ESG) disclosure developments. “Public companies are facing a rapidly changing regulatory and investor landscape with respect to climate and other environmental, social and governance (ESG) disclosures,” the authors observed.

One area of particular regulatory focus from the Securities Exchange Commission (SEC) is climate change, as several new initiatives aim to revamp the existing disclosure framework in this area, including:

  • Indications from SEC Chairman Gary Gensler that new climate change disclosure rules will be proposed in late 2021 or early 2022.
  • Significantly enhanced focus of the SEC’s Division of Corporation Finance on climate-related disclosure in public company filings, including a sample SEC Staff comment letter sent to at least dozens of companies questioning whether consideration had been given to including climate-related disclosures in SEC filings.
  • SEC Division of Enforcement announcement in early 2021 that it is creating a Climate and ESG Task Force, and signaling that enforcement actions in the climate change area under existing SEC rules may be forthcoming.

With this heightened focus, we concluded the article with five practical takeaways for companies:Continue Reading Key ESG Disclosure Developments

In light of the increasing level of investor and Securities and Exchange Commission (SEC) focus on environmental, social and governance (ESG) disclosure matters and the associated increase in the scope of ESG disclosures included by public companies both within and outside of SEC filings, public companies are well-advised to assess whether their disclosure control and procedures should be modified to address ESG disclosures.

Background on ESG Disclosures

As background, the SEC rules that implemented the Sarbanes-Oxley Act of 2002 require public companies to have disclosure controls and procedures (which are designed to ensure that the information required to be disclosed by a public company in its Exchange Act filings is recorded, processed, summarized and reported in accordance with SEC rules).  Additionally, the SEC recommended that public companies establish disclosure committees as a component of their disclosure controls and procedures, and a significant majority of public companies have disclosure committees consistent with the SEC’s recommendation.

Disclosure committees may also be helpful to public companies as a means to support the Section 302 and 906 certifications required to be provided by the CEO and CFO on a quarterly basis under the Sarbanes-Oxley Act in connection with disclosures provided in periodic reports.

The amount of ESG disclosures included in SEC filings has significantly increased in recent years. This trend will no doubt continue once the SEC’s climate change rules expected to be proposed later this year or early next year become effective.  Additionally, there has been a significant expansion in the scope of ESG disclosures being provided by many public companies (particularly large-cap companies) outside of SEC filings, including via corporate social responsibility or similar reports, and company website disclosures.Continue Reading Should Public Companies Establish an ESG Disclosure Committee?

I am excited to announce that Bass, Berry & Sims has formally launched its Environmental, Social and Governance (ESG) Advisory Practice Group. Businesses are facing increased pressure from regulators and stakeholders to meet ESG expectations and the area is rapidly evolving. To help our clients manage these new expectations, the firm has assembled a multidisciplinary…

I recently discussed the growing importance of environmental, social and governance (ESG) concerns in private deals in an article and podcast for Smart Business Dealmakers. While ESG has been a popular aspect in public deals for a while, its relevance in private deals is gaining in popularity and investors are starting to demand it.

“Oftentimes,…

On August 6, 2021, the Securities and Exchange Commission (SEC) approved Nasdaq’s proposed rule that would require a listed company to comply with certain board diversity requirements, or explain why it does not (the Board Diversity Rules).  Nasdaq proposed this rule late last year (see our blog post about Nasdaq’s proposed board diversity rules) to help make more transparent diversity in the boardroom.

Overview of Board Diversity Rules

In its approved form, the Board Diversity Rules set a “recommended objective” for most Nasdaq-listed companies with more than five directors to include at least one woman on their board of directors, along with one person who is an underrepresented minority or self-identifies as LGBTQ+.  Smaller companies with five or fewer total directors may satisfy the recommended objective with one director from a diverse background rather than two.  An “underrepresented minority” is defined as “an individual who self-identifies as one or more of the following: Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or Two or More Races or Ethnicities.”  “LGBTQ+” is defined as “an individual who self-identifies as any of the following: lesbian, gay, bisexual, transgender, or as a member of the queer community.”Continue Reading It’s a Rule! SEC Approves Nasdaq’s Board Diversity Proposal

On July 28, Securities and Exchange Commission (SEC) Chair Gary Gensler delivered remarks at the Principles for Responsible Investment’s Climate and Global Financial Markets Webinar.  In his remarks, he offered a glimpse of responses received by SEC Commissioner Allison Herren Lee to her March 2021 call for input on climate change disclosures.  (See our recent blog post summarizing recent efforts by the Biden administration.) Chairman Gensler also covered some of the items he has asked the Staff to consider as part of its proposal for mandatory climate risk disclosure to be developed by the end of this year.

Chairman Gensler noted that more than 550 unique comment letters were submitted in response to Commissioner Lee’s statement on climate disclosures in March. He pointed out that three out of every four of these responses supported mandatory climate disclosure rules.

The demand for climate risk disclosure is strong and supports Chairman Gensler’s simple rationale for the SEC’s recent focus on climate risk disclosure – “So why am I talking about climate risk? Simple: because investors are . . . Investors are looking for consistent, comparable, and decision-useful disclosures so they can put their money in companies that fit their needs.”  Required climate risk disclosure might help bring the clarity and consistency that investors have been seeking in this regard.Continue Reading A Glimpse into Required Climate Risk Disclosure Considerations by the SEC

On June 28, Commissioner Allison Herren Lee delivered the Keynote Address at the 2021 Society for Corporate Governance National Conference.  In it, she spoke on the ever-increasing role a company’s board of directors has within the environmental, social and governance (ESG) space. Notably, she provided some “key steps” for boards seeking to embrace their growing role in ESG matters and capitalize on the opportunities they present.  Some of these key steps are highlighted below:

Enhance Board Diversity for New Perspectives

Despite the plentiful evidence that makes clear the important role that ESG plays in a company’s long-term growth and capital raising opportunities, Commissioner Lee referred to some evidence that suggests directors have been relatively slow to appreciate the need to integrate ESG into governance practices. In her view, board refreshment introduces opportunities to put new directors on boards, and prioritizing diversity helps increase the chance that new directors will bring new perspectives. This, in turn, may facilitate more up-to-date and proactive approaches to ESG governance by a company’s board.Continue Reading “You Cannot Direct the Wind, But You Can Adjust Your Sails.” – The SEC Speaks on a Board’s Role in ESG Matters

From the Bass, Berry & Sims Blog Network
From the Bass, Berry & Sims Blog Network

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