Sustainability Tops Investors’ Disclosure Wish Lists

By Dave Pelland Sustainability, along with revisions to business description and management discussion & analysis (MD&A) requirements, triggered the most comment letters following an SEC concept release in April. Keith Higgins, director of corporation finance at the Securities and Exchange Commission, told first annual Pacesetters in Financial Reporting Conference in New York that a majority of the more than 360 comment letters the SEC received touched in some way on sustainability-related issues. “Many of the comments are asking the commission to create a framework for sustainability disclosure,” Higgins said. “Others recognize the enormity of that task…I think everyone recognizes that one-size-fits-all disclosure is not likely to be effective here.” Elisee Walter, a director of the Sustainability Accounting Standards Board and a former SEC chair, said SASB isn’t advocating mandatory sustainability disclosures, but would like to see a consistent framework developed that could help promote disclosure consistency. “Three-quarters of the topics addressed in [SASB] provisional standards are addressed in mandatory SEC filings,” Walter said. “It’s not the topics companies are shying away from – it’s the specificity. What SASB is doing is trying to establish, wherever possible, metrics for each of these standards. “As you go from industry to industry, we’re trying to use metrics that are already out there to have [disclosure] be cost-effective, without having to reinvent the wheel.” One of the benefits of a sustainability disclosure framework, Walter said, would be a reduction in the “torrent” of sustainability-related questionnaires companies are being asked to complete by investor and advocacy groups. Because many of these questionnaires focus on different aspects of sustainability, and questionnaires are often completed by people outside of a financial or compliance reporting function, companies spend a lot of time and effort providing information that may not be consistent with their industry peers. “It’s clearly true that investors are pushing harder and harder for this information,” Walter said. “They are dissatisfied with the quality of the information, and they are doing things like increasing the number of shareholder proposals, which I don’t think is the most cost-effective way to do this...

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Newsletter | 06/18/2018