SEC Investor Advocate calls for ESG framework

In his report on fiscal year 2020, the SEC's Investor Advocate reviewed the SEC's rule-making activities and identified areas where it believed investors were not well-served, including the SEC's recent actions involving shareholder proposals, proxy advisory firm rules, and actions to “harmonize" various securities registration exemptions.

Importantly, as it relates to ESG, the Investor Advocate recommended that the SEC prioritize action on a framework for ESG disclosure standards.  The Advocate described calls by investors (large and small) for more ESG-related information "for many years," and emphasized the risk that firms may engage in greenwashing given the dramatic increase in demand for ESG investments.

The Advocate argues that, without a framework for "specific and comparable" disclosures, "even experienced investors and large financial institutions may struggle to discern meaningful differences in the practices of
companies and funds."

He endorses what SEC Commissioners Lee and Crenshaw have proposed, namely, creating a special ESG advisory committee and an internal SEC task force to coordinate this difficult and complex move toward a comprehensive disclosure framework.

Given the stated priorities of the new administration, I'd say this is likely what we'll see in the coming months.