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The morning before Allison Herren Lee joined some of Australia’s leading directors for a sustainability risk discussion, she was heartened by news from the US. “Yet another anti-ESG rule has been struck down, this time in Missouri,” the former US SEC commissioner and acting chair told participants of the AICD roundtable held in August during her visit to Australia, which was hosted by the Melbourne Law School.
“That has occurred repeatedly and it’s because at the end of the day, economics and sound reasoning is going to win.” She was referring to foiled legal attempts by the so-called “anti-ESG” movement in the US that had surfaced in the past few years to obstruct environmental, social and corporate governance (ESG) investment mandates and fight the shift of businesses towards considering sustainability risks and opportunities in their operations. While she sees this as evidence that steam is coming out of the anti-ESG movement, the politically motivated backlash against sustainability remains a concern for Lee, who is credited with bringing ESG issues to the forefront of the SEC agenda. During her tenure as a SEC Commissioner (July 2019–July 2022), the US financial market regulator clamped down on “greenwashing” and pushed forward the mandatory climate disclosure rule introduced earlier this year, which Lee believes will give “much-needed consistency, comparability and reliability” to US financial markets. “It wasn’t that the SEC stepped in and said, ‘Oh, we’re going to create guidelines’,” explains Lee of the new disclosure rule, which has been met with a mixed response, given the polarised views in the US on the issue. “The SEC leveraged what was already happening. This entire regime [of voluntary climate disclosures] has built up outside of the SEC, driven by the market. But markets that are unregulated do not function well... and will not mature. The SEC stepped in at the right time... and the value-add is strong.” The new climate disclosure rule is set to become effective for financial year 2025 reporting, although it has been voluntarily stayed pending a judicial review of a legal challenge brought by stakeholders, including Republican-led states. Lee, who has been a securities law practitioner for more than 25 years, cautions that the rule may also be derailed if this year’s US election results in a Republican-controlled Senate. Should that happen, however, she is adamant that while the mandatory requirement may not last, that will not change the need for climate disclosures to meet the growing demand from investors. For the full story head to the AICD's Company Director magazine. Comments are closed.
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