Writer: Liz Palmer
2 min read May 2022 — As environmental, social and corporate governance (ESG) investments continue to heat up, the Securities and Exchange Commission (SEC) announced last week that officials are discussing updating the existing guidelines on the strategies’ regulations.
In a statement, SEC Chair Gary Gensler said, “ESG encompasses a wide variety of investments and strategies. I think investors should be able to drill down to see what’s under the hood of these strategies. This gets to the heart of the SEC’s mission to protect investors, allowing them to allocate their capital efficiently and meet their needs.”
Key targets of these proposals are to have companies disclose any information regarding ESG and clarify fund names. The hope is to establish a foundation for companies to base their identities as ESG-adjacent and be categorized as such by having companies include factors such as greenhouse gas emissions to their portfolios. They would also be disclosing “the specific impact(s) they seek to achieve and summarize their progress on achieving these impacts,” according to the SEC’s press release. Companies would also make public their proxy voting records and meetings related to their ESG funds. The SEC’s point? Protect investors.
Madden Advisory Services in Jacksonville touches on ESG investing but mainly focuses on other avenues for clients and will remain relatively unimpacted by the SEC’s proposals. President and owner Mike Ellis told Invest:, “What they’re really targeting are the folks that say they ESG invest and turn right back around with no clear evidence that they are. From that aspect, I understand what the SEC is driving at. Any time you can offer more transparency to clients it’s absolutely encouraged. I would prefer that we wouldn’t have to do that through regulation, but I get it.”
Of course, there are concerns for what this means for the free market. SEC Commissioner Hester M. Peirce said, “In any event, this proposed rule misses the mark,” in a response to the decision last week. Her reservations are in the potential fallout investors would experience following the proposals’ passing, arguing “Environment,” “Social,” and “Governance” were not defined clearly enough.
And for Ellis it all comes down to protecting Americans. “Because of the possibility of restricting or reducing investment through ESG-claiming companies, the regulations could drastically impact the lives of the American people – that’s the part that isn’t being talked about,” he said. “My main concern is if it gets to the point where some of these companies are not ESG, they suddenly have less access to funding or investment capital. We could see a major dent in innovation, competition and a number of other areas just because of an unanticipated impact of this regulation.”
Countries abroad such as Sweden, Denmark, United Kingdom, and France were defined by experts as having well-developed frameworks in ESG, whereas the United States is among those rapidly improving.