US companies to face stepped-up engagement from SEC on climate-change disclosure, official says

The US Securities and Exchange Commission plans to play an active role domestically and internationally in developing disclosure regimes for companies facing climate change that could impact their finances, SEC acting Corporation Finance Director John Coates said.

Asked at a webinar* whether the securities regulator should energetically build on its established framework, he said: “Yes. The SEC can and should lead the creation of an [environmental, social and governance] disclosure system to help companies give investors the information needed to make investing and voting decisions.”

Coates, who was a Harvard law and economics professor before his government appointment this month, said developing this system will be complicated by a number of “challenging” questions that need to be addressed. These include how much rule standardization can be achieved, what the right balance should be between principles and specific metrics, and when and how standards should evolve.

As for whether disclosures should remain voluntary, he said investor demands for more company disclosure are already pushing some corporations to assess and reveal the impacts of climate change on their finances.

“That becomes a place where a regulatory body can help, and I hope we can,” Coates said.

Internationally, companies with global reach need standards that can be uniformly applied across jurisdictions, he said. Developing a global framework won’t be easy, however.

“We need a governance system, we need some oversight, we need different types of engagement,” Coates said. “We need funding to be reliable and secure so that the process can play out over time.”

“The SEC,” he added, “can and should play a leading role.”