The House of Representatives has passed legislation to require public companies to disclose environmental, social, and governance metrics, helping shareholders to better-pressure corporations on socially responsible issues like climate risk.
The passage of the bill marked the first time a chamber of Congress passed sweeping legislation over transparency on corporate sustainability issues, Roll Call reports.
The new rules would require disclosure of ESG metrics and hold reporting expectations on specific ESG issues like climate risks, political spending, CEO pay, and taxation rates.
The package “will create clear, consistent disclosure standards for issuers and finally provide investors and our markets with the information they need to make the best investment decisions possible and to hold the companies they’re invested in accountable,” House Financial Services Chairwoman Maxine Waters, D-Calif., said Monday during a Rules Committee meeting on the measure.
Meanwhile, the Securities and Exchange Commission said it is considering transparency rules on climate risk, board diversity, and workforce matters as well.
While the White House and congressional Democrats have been pushing for clearer ESG disclosure mandates, the push faces an uphill battle from Republicans and the broader industry, many of whom argue that the additional requirements would be premature and costly.
Rep. French Hill, R-Ark., argued that there’s no agreement on the best way to disclose ESG metrics and the proposed rule changes are an attempt to “name and shame” companies.
The package push forward by California Rep. Juan C. Vargas includes ESG proposals many individuals and organization have been clamoring for.
“We’re very encouraged that disclosure legislation is moving,” Bryan McGannon, director of policy and programs for US SIF, a group for sustainable funds whose members manage $5 trillion, told Roll Call. “This is a big moment.”
A Statement of Administration Policy from the White House Office of Management and Budget this week also showed its support for the passage of the ESG bill, stating that it would implement important changes to how public companies account for and disclose certain risks.
“The Administration supports efforts to account for climate risk in financial services, empower and protect investors, and promote transparency, accountability and equity in corporate governance,” according to the White House.
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