US market regulator the Securities and Exchange Commission (SEC) has been urged by one of its own committees to develop standardised principles-based rules for ESG disclosure.
In a report presented to the SEC yesterday, the regulator’s Investor Advisory Committee (IAC) called for “a structured US response” on ESG disclosures, noting that investors now consider ESG information material “regardless of whether their investment mandates include an ‘ESG-specific’ strategy”.
A standardised disclosure framework is key to level the playing field between small and large companies, said the IAC. It observed that smaller companies were often unable to dedicate the resources to respond to questionnaires provided by the ESG data firms, leaving them at greater risk of being issued low ESG scores, compared to larger, better-financed companies. This can have a negative impact on share price performance and the ability to raise capital, it pointed out.