Securities Regulation Daily ICI calls for global framework for ESG reporting
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Tuesday, December 8, 2020

ICI calls for global framework for ESG reporting

By Anne Sherry, J.D.

The head of the Investment Company Institute urged the Biden administration to promote a global regulatory framework for ESG factors.

The governors of the Investment Company Institute unanimously approved a statement encouraging enhanced disclosure of environmental, social, and governance factors. Specifically, the board is urging disclosures that comport with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and the standards of the Sustainability Accounting Standards Board (SASB). In a letter to the editor of MarketWatch, ICI CEO Eric J. Pan called on the Biden administration to work towards a uniform, global standard for ESG disclosures.

In 2017 the TCFD published formal recommendations for corporate disclosure of issues surrounding climate-related risks and opportunities, including governance, material impacts, means for assessment, and metrics and targets used. Pan said that ICI is urging disclosure under the TCFD recommendations to ensure that fund managers have access to "decision-useful ESG-related information that is consistent and high quality." Ideally, this includes comparable data, Pan said. He added that the disclosures would also help policymakers when considering action on ESG-related issues.

ICI said that the board’s action "adds significant momentum" to the call for SASB-compliant ESG disclosure, as ICI’s members manage more than $34 trillion in assets. In his letter to the editor, Pan called on the incoming Biden administration to "seize on this momentum to provide leadership and perspective in discussions with other international regulators." President-elect Biden should announce support for TCFD and SASB and call for a consistent global standard for ESG disclosure in his first 100 days in office, Pan added. "Achieving this goal will help streamline how we analyze climate risk and better serve the needs of investors—individual and institutional alike—and advance an important part of the Biden administration’s priorities."

Pan’s letter appeals to the need for change, observing that the U.S. has failed to act while policymakers abroad introduce legislation and propose international standards for ESG disclosure. This piecemeal effort runs the risk of clashing disclosure regimes that sow confusion when clarity and consensus are needed. The SEC has both expertise in disclosure and the authority to lead work on a global disclosure standard, and the rest of the Biden administration should support the agency’s work towards this goal. "We’ll get one chance to get this right," Pan cautioned.

Earlier in 2020, the ICI board endorsed an ESG roadmap that offers consistent terminology to enhance communication on ESG investing. The roadmap distinguishes between the different ways fund managers consider ESG factors and encourages fund complexes to use the terminology to promote public understanding of ESG issues.

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