President Joe Biden’s Securities and Exchange Commission pick Gary Gensler could help address progressive reforms like tackling the issue of climate change and prioritizing investor protection and sustainability.
Lisa Woll, CEO of US SIF: The Forum for Sustainable and Responsible Investment, argues in Baron’s that the next SEC chair should support the role of environmental, social, and governance criteria in the investment process.
The SEC also instituted a senior policy advisor for climate and ESG for the first time after Acting Chair Allison Herren Lee created the position earlier in the year.
“It is extraordinary that it took until 2021 to have a position focused on these matters, but it is a clear signal that the SEC understands the critical role that the climate crisis and a range of ESG issues play in the investment process. This appointment is a good start, but in order to embed the expertise across the agency, leadership will need to ensure that division heads and staff in commissioners’ offices also have ESG expertise,” Woll said.
Woll believes that the new chair should create an external advisory committee to provide guidance and recommendations on current and future ESG trends. The SEC needs to play catch-up with the investment community, as one in every three dollars under professional management now follows ESG criteria.
Furthermore, Woll highlighted the importance of establishing a mandatory, comprehensive framework for public company reporting of ESG issues.
“Over the last decade, the SEC has received requests to require comprehensive sustainability disclosure from publicly traded companies. Transparency is a core underpinning of a more inclusive economy, and investors need disclosure on the full range of ESG issues that could impact a company. In 2016, when the SEC asked for public feedback on whether and how it should change its core corporate disclosure rules, it received 26,512 comments. There was clear support for expanded disclosures. And for good reason: a robust and growing body of evidence shows ESG factors are material to financial performance,” Woll concluded.