SEC Commissioner Hester Pierce's analysis of the potential SEC rule making on ESG disclosures is one of the best things I have read on the topic. She advances a number of theses:
- Thesis 1: ESG as a category of topics is ill-suited, and perhaps inherently antithetical, to the establishment of clear boundaries and internal cohesion.
- Thesis 2: Many ESG issues lack a clear tie to financial materiality and therefore do not warrant inclusion in SEC-mandated disclosure.
- Thesis 3: The biggest ESG advocates are not investors, but stakeholders.
- Thesis 4: ESG rulemaking is high-stakes because so many people stand to gain from it.
- Thesis 5: “Good” in ESG is subjective, so writing a rule to highlight the good, the bad, and the ugly will be hard.
- Thesis 6: An ESG rulemaking cannot resolve the many debates around ESG models, methodologies, and metrics.
- Thesis 7: Emotions around ESG issues may push us to write rules outside our area of authority.
- Thesis 8: ESG issues are inherently political, which means that an ESG rulemaking could drag the SEC and issuers into territory that is best left to political and civil society institutions.
- Thesis 9: ESG disclosure requirements may direct capital flows to favored industries in a way that runs counter to our historically agnostic approach.
- Thesis 10: An ESG rulemaking could play a role in undermining financial and economic stability.
10 for 10.
This is a must read for those who labor in this vineyard.