Securities regulators world-wide 'gravitating' to sector-specific approach to climate disclosure, US SEC chief says

18 Nov 2020 12:00 am by Neil Roland

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Securities regulators world-wide are “gravitating” to a view that companies’ global-warming disclosures should differ by industry sector, US Securities and Exchange Commission Chairman Jay Clayton said.

Clayton said he spoke with an International Organization of Securities Commissions task force yesterday about how to create global standards that are “meaningful.”

“This is an area where, for certain sectors and certain companies, we all believe disclosure is required, it’s material,” he told the Senate Banking Committee yesterday. “Different sectors, different ways.”

Madrid-based Iosco, made up of securities regulators across the world, formed a task force on sustainable finance in February to weigh in on corporate climate-change disclosure.

The task force’s goals are to improve sustainability-related disclosures by companies and asset managers, as well as improve coordination with other global authorities also working on global-warming standards.

— Forward-looking disclosure —

Clayton, a Trump appointee who is stepping down at the end of the year, said all disclosure about the possible impact of climate change on a company’s finances is “forward-looking.”

“But it’s really hard to make forward-looking disclosure that’s going to be accurate over time,” he said.

Still, Clayton said, a forecast is likely to be useful to investors.

He cited as an example corporate disclosure of backlogs of goods that they plan to sell in the next two years.

“Backlog numbers usually prove to be meaningful but somewhat inaccurate,” Clayton said.

Companies, therefore, shouldn’t be held to forward-looking “precision” or “metrics” as long as these estimates are “in good faith,” he said.

Senator Brian Schatz, a Hawaii Democrat, argued that uniform platforms and disclosure requirements are needed so “everyone isn’t inventing his own sector technique by sector or even by individual company.”

The UK’s Financial Reporting Council said last week that corporate boards “cannot exclude climate change from their decision making. The impact of climate change will vary by company, but it is a board’s responsibility to consider the possible implications.”

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