Sarah Solum, Valerie Ford Jacob, and Michael Levitt are partners at Freshfields Bruckhaus Deringer LLP. This post is based on a Freshfields memorandum by Ms. Solum, Ms. Jacob, Mr. Levitt, Pamela Marcogliese, Elizabeth Bieber and Heather Kellam. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance and Will Corporations Deliver Value to All Stakeholders?, both by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock by Leo E. Strine, Jr. (discussed on the Forum here).
In his remarks before the Principles for Responsible Investment “Climate and Global Financial Markets” webinar on July 28, 2021, SEC Chair Gary Gensler provided insights into what companies might expect from the SEC’s upcoming climate disclosure rules. Gensler’s remarks follow in the wake of other similar proposals for enhanced climate disclosure made by authorities in the European Union and various European countries.
“When it comes to disclosure, investors have told us what they want,” Gensler said in his speech. “More than 550 unique comment letters were submitted in response to my fellow Commissioner Allison Herren Lee’s statement on climate disclosures in March. Three out of every four of these responses support mandatory climate disclosure rules.” Gensler believes that “the SEC should step in when there’s this level of demand for [climate] information relevant to investors’ decisions.”
Gensler said that new climate change rules follow in the footsteps of historical changes the SEC has made to disclosure requirements, such as adding new requirements for risk factors in 1964, MD&A in 1980 and stock compensation in the 1990’s.
Gensler analogized this evolving public company disclosure to the expansion of the Olympics: