Capital Markets & Securities Law Watch

Over the last two decades, sustainability has become a mainstream global concern, shaping innovative financial instruments (in the form of loans and debt securities) that integrate environmental, social, and corporate governance (ESG) factors with broader considerations for long-term economic sustainability, collectively defined as sustainable finance.

On March 6, 2024, the US Securities and Exchange Commission (SEC or Commission) announced the adoption of final rules requiring registrants – both domestic companies and foreign private issuers (FPIs) – to include climate-related information in their registration statements and annual reports. 

On February 22, 2023, the chairman of the House Financial Services Committee, Patrick McHenry, along with other Republican leaders in the House and Senate, released a letter (“the Letter”) to Chair Gary Gensler of the Securities and Exchange Commission (SEC), seeking information related to the recently proposed SEC climate disclosure rules.

In a videoconference with the European Parliament, Securities and Exchange Commission (SEC) Chairman Gary Gensler commented that he had asked SEC staff to make recommendations for new disclosure requirements for fund and asset managers on the criteria and data that they use to apply “green,” “low-carbon,” or “sustainable” labels to their investments.

On July 28, 2021, Securities and Exchange Commission (SEC) Chair Gary Gensler delivered prepared remarks before the Principles for Responsible Investment “Climate and Global Financial Markets” webinar where he directed “SEC staff to develop a mandatory climate risk disclosure rule proposal for the [SEC’s] consideration by the end of the year.”

On August 6, 2021, the Securities and Exchange Commission (SEC) approved a Nasdaq proposal to amend its listing rules intended to increase diversity on corporate boards of directors.

On July 7, 2021, the Securities and Exchange Commission (SEC) Asset Management Advisory Committee (AMAC) proposed five recommendations to improve the data and disclosure used for environmental, social, and governance (ESG) investing.

A dozen state attorneys general — led by California and New York — are calling on the SEC to mandate broad ESG disclosures for climate-related financial risks. 

On August 30, 2020, the California State Legislature took another unprecedented step in spearheading the promotion of greater diversity on public company boards by passing a new bill (Assembly Bill (AB) 979) requiring each publicly held corporation whose principal executive offices are located in California—regardless of state of incorporation—to have a minimum number of directors from “underrepresented communities” on its board of directors.

The SEC’s Investor Advisory Committee (the Committee) sounded the bugle for SEC action on environmental, social, and governance (ESG) disclosures in its May 14, 2020, formal recommendation. Following four years of meetings with investment advisors, asset managers and owners, and U.S. and foreign issuers, the Committee found that “investors consider certain ESG information material to their investment and voting decisions, regardless of whether their investment mandates include an ‘ESG-specific’ strategy.”

As the world continues to respond to the threat of COVID-19, financial markets and corporate constituencies are looking more closely at how environmental, social, and governance (ESG) considerations can help companies respond to the impact of COVID-19, both in the short term and long term, drive the re-imagination of global business models, and prevent crises in the future.