This week, Rep. Maxine Waters (D-CA), Chair of the House Financial Services Committee published the Committee’s hearing schedule for March, and in addition to already-announced priorities, of particular note is a March 26 subcommittee hearing on “Building a Sustainable and Competitive Economy” which will focus on "proposals to improve environmental, social, and governance disclosures.”
The topic is not surprising given the increased interest in ESG information by both large investors -- primarily the large index funds such as BlackRock, Vanguard and State Street -- as well as the push for greater disclosures by investors with a specific advocacy bent. As we reported last week, a recent Morrow-Sodali study found that investors seek greater information on corporate culture, climate change and human capital metrics. The Wall Street Journal reports today that shareholder proposals asking companies to produce climate change disclosures are expected to jump to 75 or more in 2019 from 17 in 2018. Last year, ESG proposals were the most prevalent type of shareholder proposal.
Issue investors have been pushing for ESG disclosure standards at the SEC. Over the past two years, a group of investors petitioned the SEC for standardized ESG disclosures, and in 2017, a group of union and state pension funds petitioned the SEC for greater disclosure of human capital metrics. In December, the International Standards Organization published voluntary standards for human capital reporting. SEC Chair Clayton has indicated his reluctance to develop guidance in this area, focusing instead on requiring disclosure of "the material information that a reasonable investor needs to make informed investment and voting decisions" and noting that because human capital considerations vary considerably company to company, "I am wary of jumping in with rules or guidance that would mandate rigid standards or metrics for all public companies." With this as backdrop, it would not be surprising if the hearing again aired the desire of certain groups for greater mandated disclosure.
The other announced hearings for March included many previously announced Democrat priorities including a review of the Consumer Financial Protection Bureau, a review of the Well Fargo Scandal, and an examination of legislative proposals to “promote corporate transparency” to prevent corporate wrong-doing.