SEC Commissioner suggests tailoring ESG disclosure requirements in light of "inevitable" costs

In remarks before the ESG Board Forum on June 3, 2021, Commissioner Elad Roisman of the U.S. Securities and Exchange Commission (SEC) expressed concerns about the agency's stated plans to develop new requirements for granular ESG disclosures in SEC filings by public issuers. Citing the foreseeable costs of such requirements - both in obtaining and presenting this information, and increased liability for making such disclosures - Commissioner Roisman suggested a number of ways to tailor ESG disclosure requirements so as to balance these costs and benefits:

1. Scaled Disclosure for Public Issuers: Limit ESG disclosure requirements to public companies and scale the requirements to lighten the burden on smaller companies (whether via alternative disclosure options or an option to delay compliance). 

2. Flexibility in Sources and Methodologies: Allow issuers flexibility in how they present new ESG disclosures, recognizing the difficulties of obtaining and calculating relevant ESG information, which will likely require that companies hire outside vendors. 

3. Safe Harbors: Address the inevitable litigation risk accompanying new disclosure requirements by providing a safe harbor for ESG disclosures similar to what is set out for forward-looking statements. 

4. Furnished, not Filed: Minimize litigation risks by having the disclosures be furnished to the SEC rather than publicly filed, similar to the approach taken for resource extraction payments.

5. Extended Implementation Period: Phase in particular requirements, allow smaller companies a longer implementation period, and allow a good amount of time for compliance measures to develop before bringing enforcement actions.