Companies are increasing ESG reporting: US Chamber of Commerce

Most public companies are reporting more information about ESG factors and the vast majority want potential Securities and Exchange Commission mandatory disclosure rules to be flexible, according to the U.S. Chamber of Commerce.

The Chamber on Wednesday released a survey of 436 public companies that showed that 59% have increased their disclosures about climate risk in quarterly or annual reports to the SEC since the agency issued guidance on topic in 2010.

About one third (34%) of companies disclose information about risks related to climate change, greenhouse gas emissions or energy sourcing in their SEC filings. Those disclosures are voluntary.

Just over half of companies (52%) publish voluntary corporate social responsibility, sustainability or environmental social and governance reports outside of their SEC filings, the Chamber report said.

In a speech last week, SEC Chairman Gary Gensler said he has directed staff to develop a mandatory climate risk disclosure rule proposal by the end of the year. Those disclosures could include information about how a company manages climate-related risk and metrics on greenhouse gas emissions and the financial impact of climate change.

The SEC wants to give investors the “consistent, comparable, and decision-useful disclosures” they’re demanding as the popularity of ESG investing soars, Gensler said.

But the Chamber said its survey indicates that companies want the agency to tread carefully when it comes to beefing up ESG disclosures.

“Promulgating rules that provide for effective disclosure without overburdening public companies and their shareholders will be an enormously difficult task for the SEC,” the Chamber report states. “The wide spectrum of public company opinions on these issues show why the SEC must proceed cautiously and include the input of those who will be most affected by new regulations.”

The Chamber survey indicates that the vast majority of companies (84%) want the SEC to build flexibility into any climate disclosure mandate and to write rules that reflect differences between various industries.

The survey showed that 61% of companies believe ESG is a “subjective term that applies to different companies in different ways” and another 20% say ESG is “used too broadly.”

The debate over whether ESG information affects the financial performance of companies has been intense.

Republican lawmakers and GOP SEC commissioners have questioned whether ESG factors are material and assert that companies should make that determination. Gensler, the other Democratic SEC commissioners and congressional Democrats say materiality is determined by investors.

But Jean Rogers, founder of the Sustainability Accounting Standards Board, said investors can’t separate the wheat from the chaff of ESG disclosures.

“Investors are swimming in a sea of ESG information,” Rogers said in an online Chamber event accompanying the release of the report. “They don’t have clarity on what is material.”