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Gary Gensler.
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Can the Biden administration, in nominating Gary Gensler as chairman of the Securities and Exchange Commission, seize the moment to prioritize investor protection and stability?
The next SEC chairman will have many priorities, but key items on that list must be a renewed focus on the SEC’s mission to protect investors and support the role of environmental, social and regulatory criteria in the investment process. .
Gensler, who chaired the Futures Trading Commission, will have the opportunity to present his agenda to the Senate Banking, Housing and Urban Affairs Committee today.
Gensler has a unique opportunity to establish a policy that could help the SEC catch up with the investment community, where one in three professionally managed dollars now uses environmental criteria , social and managerial.
The SEC has a senior policy adviser for climate and ESG for the first time, after Acting Chairman Allison Herren Lee created the position earlier this year. Surprisingly, it took until 2021 a position to focus on these issues, but it is a clear indication that the SEC recognizes the critical role of climate crisis and a range of ESG issues in the field. investment process. This role is a good starting point, but to consolidate the knowledge across the organization, leadership needs to ensure that department heads and staff in commissioners’ offices also have ESG experience.
The SEC would also be well served by utilizing the sustainable investment expertise available among clients, subject matter experts, and sustainable investment agencies. We will encourage the new chair to form an external advisory committee to provide guidance and recommendations on current and future ESG trends.
The SEC should also establish a comprehensive mandatory framework for public company reporting on ESG cases.
Over the past decade, the CSS has received requests to request widespread sustainability disclosure from public commercial companies. Transparency is the foundation of a more inclusive economy, and investors need to publish the full range of ESG issues that can affect a company. In 2016, when the CSS sought public feedback on whether and how it should change the core corporate disclosure rules, it received 26,512 comments. There was clear support for extended publications. And for good reason: a strong and growing body of evidence shows that ESG factors are relevant to financial performance.
In 2018, investor and financial reform agencies as well as academics followed a petition to the SEC calling for the establishment of a mandatory reporting framework. They noted that ESG’s voluntary disclosure of companies is incidental, incomplete and inconsistent.
In addition to empowering all investors with ESG’s comprehensive disclosure framework, the SEC should reverse regulation of proxy advisors and shareholder voting. In September, the SEC issued a rule that reduces the ability of investors to submit shareholder proposals and makes it more difficult for Main Street investors to submit proposals. Follow this rule one that restricts the independence of proxy consulting firms. Together these regulations significantly improved the power of corporate governance at the expense of investors.
Over the past decade, through their portfolio choices and stakeholder involvement, investors have assessed environmental, social and regulatory risks and opportunities in their investments. The SEC has gone late and created roadblocks. The next SEC chairman has an opportunity to lead on these issues and we look forward to learning more about Gensler’s plans.
Lisa Woll is the CEO of SIF USA: The Forum for Sustainable and Responsible Investment.