Timothy Massad, Columnist

The SEC Needs to Catch Up on Sustainability

Companies should expect new disclosure rules on environmental, social and governance issues. Here's why they're needed.

January 27, 2021 at 2:30 PM UTC

Timothy Massad is a research fellow at the John F. Kennedy School of Government at Harvard University. He served as chairman of the Commodity Futures Trading Commission from 2014 to 2017 and was the U.S. Treasury Department's assistant secretary for Financial Stability and oversaw the Troubled Asset Relief Program.

The rising value of sustainability.
Source: Bloomberg

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One issue that's sure to be on Gary Gensler’s agenda if he's confirmed as the new chair of the Securities and Exchange Commission is climate-change-related disclosure. The two Democrats on the five-member commission, Allison Lee and Caroline Crenshaw, have already indicated support for the idea. So the real question is: What will be the scope of any new rules, and will they cover the expanding universe of environmental, social and governance issues — and sustainability in general?

It would be easy to say that the SEC hasn't acted in this area because of the Donald Trump administration’s opposition to climate change and ESG initiatives. But that's too simplistic. I believe Jay Clayton, the SEC chair for almost all of Trump’s term, has been reluctant to act because of his honestly held views about what's appropriate under the law. It’s worth considering the reasons Republican commissioners have articulated their objections, because any new SEC action will need to show why those concerns aren't persuasive.