ESG, or Environmental, Social and Governance, is a big sector of debate in the financial services sphere. While offering investors an option to invest in impact focused firms is one thing, demanding companies to pursue goals aligning with one political perspective is something very different.
Today, at the Securities and Exchange Commission, a top agenda item is ESG, starting with climate disclosure. This means firms may be required to document and disclose their impact on the environment in all sorts of innumerable ways. Most likely this will generate a new industry of “green washing” consultants that concoct evidence designed to adhere to any new compliance rules that will be less science and more regulatory art. At the same time, the cost to these firms (and by extension investors) is unknown but it will certainly be a hefty, ongoing toll. Last year, the SEC Small Business Capital Formation Advisory Committee told the Commission that climate disclosure may deter firms from going public, thus undermining further the tepid IPO market.
Critics of mandated ESG regulation claim the SEC is not the Securities and Environment Commission and any new rules go far beyond the remit of securities regulation. Supporters believe that items like climate impact everything – so by extension reporting firms and the securities they may issue.
The House Financial Services Committee has scheduled a hearing to discuss ESG in a meeting entitled – “Protecting Investor Interests: Examining Environmental and Social Policy in Financial Regulation.”
While the list of witnesses testifying before the full Committee has yet to be published the date of the hearing is set for Wednesday, July 12, 2023 10:00 AM. The hearing will be live-streamed on the Committee’s website.
