By a razor thin vote of 215 to 214, the House of Representatives passed the ESG Disclosure Simplification Act of 2021.
The Act would require public companies to disclose in any proxy or consent solicitation material for an annual meeting of the shareholders:
- a clear description of the views of the issuer about the link between ESG metrics and the long-term business strategy of the issuer; and
- a description of any process the issuer uses to determine the impact of ESG metrics on the long-term business strategy of the issuer.
The bill mandates the SEC:
- to require each public company to disclose environmental, social, and governance metrics in any filing of the issuer described in such part that requires audited financial statements; and
- to define ESG metrics.
According to the legislation, it is the sense of Congress that ESG metrics are de facto material for the purposes of disclosures under the Securities Exchange Act of 1934 and the Securities Act of 1933.
The legislation also requires the SEC to establish a permanent advisory committee to be called the “Sustainable Finance Advisory Committee.” Among other things, the Committee would be required to:
- submit a report to the Commission not later than 18 months after the date of the first meeting of the Committee that:
- identifies the challenges and opportunities for investors associated with sustainable finance; and
- recommends policy changes to facilitate the flow of capital towards sustainable investments, in particular environmentally sustainable investments;
- when solicited, advise the Commission on sustainable finance; and
- communicate with individuals and entities with an interest in sustainable finance.
The bill defines “sustainable finance” as the provision of finance with respect to investments taking into account environmental, social, and governance considerations.