The Investment Company Institute (ICI) said the Securities and Exchange Commission (SEC) should require companies to disclose direct and indirect greenhouse gas emissions data and demographic information about their workforces.
The statement responds to a call for feedback that the SEC recently put out on climate change-related corporate disclosure. Consistent, comparable, and reliable data about climate change and workforce diversity make it easier for fund managers to make investment decisions on behalf of retail investors who invest in their funds, ICI officials said.
“Mandating disclosure of greenhouse gas emissions and workforce diversity will give fund managers the consistent, comparable, and reliable data they need to better assess current and future sustainability-related risks,” ICI President and CEO Eric Pan said. “While we believe certain disclosures should be mandatory, it’s essential that the SEC develops a regulatory framework that is flexible enough to allow disclosure practices to develop organically over time. Having a dynamic framework will enhance the quality and volume of disclosures about how sustainability-related risks could affect companies’ long-term value, which drives investment decisions. In the past, the SEC has successfully applied the materiality standard to principles-based regulation, and we believe that standard is an appropriate foundation for any climate change-related corporate disclosure framework.”
ICI also called on the SEC to promote the development of reporting practices before considering requiring companies to disclose other indirect sources of greenhouse gas emissions. In addition, it should leverage private-sector initiatives so it can more easily catch up to sustainability-related reporting that US market participants voluntarily have achieved over the past decade.
Also, they said the SEC should allow companies to disclose climate change-related information in various formats and discourage the use of boilerplate language. In addition, it should promote a global framework for corporate sustainability disclosure, given the international nature of capital markets and the shared challenges that climate change poses worldwide.
Further, ICI states that the commission should require private companies that meet specific asset and shareholder criteria to disclose the same sustainability information as public companies so investors can assess those entities as well. Finally, it should establish a committee that includes a wide range of market participants — including companies, funds, and investors — to understand better how climate change risk affects companies.
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