Washington, D.C. — This week, investors representing more than $5 trillion in assets under management filed a petition for rule-making at the U.S. Securities and Exchange Commission (SEC) to create a standard disclosure framework for environmental, social, and governance (ESG) issues facing public companies. Current signers cover city and state retirement systems, religious organizations, investment firms, pension funds, and premier academics. To accompany this new effort, the Center for American Progress today released a new report that examines the excessive corporate focus on short-term results in today’s capital markets and makes the case that shareholders and stakeholders of all types and sizes do not have access to the long-term-oriented information they need—in particular, ESG information—in a consistent, comparable, and reliable manner.
“On environmental, social, and governance issues, investors are demanding far more transparency of publicly traded companies, and the SEC must lead the way on setting strong disclosure standards. Transparency benefits investors, companies, and the broader U.S. economy alike,” said Andy Green, managing director of Economic Policy at CAP and co-author of the report. “Strong ESG disclosure standards will ensure that long-term investors are better protected, capital is more effectively allocated, and the public interest is better served.”
CAP’s report recommends that the SEC update its disclosure regime and related tools to better align interests of investors, management, and the public toward long-term economic success and the public interest. CAP’s recommendations include:
- Requiring high-quality, consistent ESG disclosure on both marketwide and sectoral bases
- Looking to expert, nongovernmental standards or standard-setters for ESG disclosure standards
- Defending an investor-oriented, public-interest approach to the disclosure mandate
- Updating audit and data tagging standards to boost the availability and reliability of information
- Empowering SEC staff to be the voice of long-termism on behalf of investors and the public
- Bringing clear, bold enforcement actions and support similar actions by states and private investors
- Boosting board attention to corporate long-termism and sustainability
- Boosting shareholder voice in favor of ESG and long-termism
The report also examines workforce training and climate change as two case studies for how insufficient ESG information is limiting the long-term orientation of markets and companies, which harms shareholders, workers, and the public.
Today’s report represents CAP’s ongoing work in this space and is a follow-up to earlier CAP reports looking at the role of public policy in promoting long-term investments, as well as a major convening focused on broad economic trends, producing shared prosperity, and the role of business in doing so.
Click here to read “Corporate Long-Termism, Transparency, and the Public Interest” by Andy Green and Andrew Schwartz.
Related resources:
- Workers or Waste? How Companies Disclose—or Do Not Disclose—Human Capital Investments and What to Do About It by Angela Hanks, Ethan Gurwitz, Brendan Duke, and Andy Green
- 5 Steps to Address Corporate America’s Short-Termism Problem by Brendan Duke, Andrew Schwartz, and Andy Green
- Long-Termism or Lemons: The Role of Public Policy in Promoting Long-Term Investments by Marc Jarsulic, Brendan Duke, and Michael Madowitz
- Toward A Sustainable Economy: Transparency, Long-Termism, and the SEC, a Center for American Progress Action Fund event
For more information or to speak with an expert, contact Allison Preiss at [email protected] or 202-478-6331.