H. Rept. 117-54 - Esg Disclosure Simplification Act of 2021, 2021-06-08

• Date: 08 June 2021
• Type of Document: House Report
• Issuer: Committee on Financial Services

19–006

117

TH

C

ONGRESS

R

EPORT

" !

HOUSE OF REPRESENTATIVES

1st Session 117–54

ESG DISCLOSURE SIMPLIFICATION ACT OF 2021

J

UNE

8, 2021.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Ms. W

ATERS

, from the Committee on Financial Services,

submittedthefollowing

R E P O R T

together with

MINORITY VIEWS

[To accompany H.R. 1187]

[Including cost estimate of the Congressional Budget Office]

The Committee on Financial Services, to whom was referred the

bill (H.R. 1187) to provide for disclosure of additional material in-

formation about public companies and establish a Sustainable Fi-

nance Advisory Committee, and for other purposes, having consid-

ered the same, reports favorably thereon with an amendment and

recommends that the bill as amended do pass.

CONTENTS

Page

Purpose and Summary ............................................................................................3

Background and Need for Legislation ....................................................................4

Section-by-Section Analysis of the Legislation ......................................................5

Hearings ...................................................................................................................7

Committee Consideration ........................................................................................7

Committee Votes ......................................................................................................7

Committee Oversight Findings ...............................................................................12

Statement of Performance Goals and Objectives ..................................................12

New Budget Authority and C.B.O. Cost Estimate ................................................12

Committee Cost Estimate .......................................................................................12

Federal Mandates Statement .................................................................................12

Advisory Committee Statement ..............................................................................12

Applicability to Legislative Branch ........................................................................12

Congressional Earmarks, Limited Tax Benefits, and Limited Tariff Benefits ...12

Duplicative Federal Programs ................................................................................13

Changes in Existing Law ........................................................................................13

Minority Views .........................................................................................................33

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2

The amendment is as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘ESG Disclosure Simplification Act of 2021’’.

SEC. 2. FINDINGS.

Congress finds the following:

(1) The Securities and Exchange Commission has broad authority to require

the disclosure of information if such information is in the interest of, or is mate-

rial to investors.

(2) The Commission does not require companies to disclose information re-

lated to environmental, social, and governance (‘‘ESG’’) matters, and does not

require companies to adhere to standards for disclosing such information.

(3) Investors have reported that voluntary disclosures of ESG metrics are in-

adequate.

(4) A rule requiring reporting and standardization of ESG disclosures is in the

interest of investors.

(5) ESG matters are material to investors, and the Commission must estab-

lish standards for disclosure of such matters.

SEC. 3. ESG DISCLOSURES.

(a) I

N

G

ENERAL

.—Section 14 of the Securities Exchange Act of 1934 (15 U.S.C.

78n) is amended by adding at the end the following:

‘‘(k) ESG D

ISCLOSURES

.—

‘‘(1) I

N GENERAL

.—Each issuer the securities of which are registered under

section 12 or that is required to file annual reports under section 15(d) shall

disclose in any proxy or consent solicitation material for an annual meeting of

the shareholders—

‘‘(A) a clear description of the views of the issuer about the link between

ESG metrics and the long-term business strategy of the issuer; and

‘‘(B) a description of any process the issuer uses to determine the impact

of ESG metrics on the long-term business strategy of the issuer.

‘‘(2) ESG

METRICS DEFINED

.—In this subsection, the term ‘ESG metrics’ has

the meaning given the term in part 210 of title 17, Code of Federal Regulations

as amended pursuant to section 3(b) of the ESG Disclosure Simplification Act

of 2021.’’.

(b) R

ULEMAKING

.—

(1) I

N GENERAL

.—The Securities and Exchange Commission (in this Act re-

ferred to as the ‘‘Commission’’) shall amend part 210 of title 17, Code of Federal

Regulations (or any successor thereto) to—

(A) require each issuer, in any filing of the issuer described in such part

that requires audited financial statements, to disclose environmental, so-

cial, and governance metrics (in this Act referred to as ESG metrics); and

(B) define ESG metrics.

(2) S

USTAINABLE FINANCE ADVISORY COMMITTEE

.—The Sustainable Finance

Advisory Committee established pursuant to section 4(k) of the Securities and

Exchange Act of 1934 shall, not later than 180 days after the date of the first

meeting of such Committee, submit to the Commission recommendations about

what ESG metrics the Commission should require issuers to disclose.

(3) M

ATERIALITY

.—It is the sense of Congress that ESG metrics, as such term

is defined by the Commission pursuant to paragraph (1), are de facto material

for the purposes of disclosures under the Securities Exchange Act of 1934 and

the Securities Act of 1933.

(4) I

NCORPORATION OF INTERNATIONAL STANDARDS

.—When amending part 210

of title 17, Code of Federal Regulations (or any successor thereto) pursuant to

paragraph (1), the Commission may, as the Commission determines appro-

priate, incorporate any internationally recognized, independent, multi-stake-

holder environmental, social, and governance disclosure standards.

(5) L

OCATION OF DISCLOSURE

.—Any disclosure required by paragraph (1) may

be included in a notes section of the filing.

(6) D

ELAY FOR SMALL ISSUERS

.—The Commission may use a phased approach

when applying any amendments made pursuant to paragraph (1) to small

issuers and may determine the criteria by which an issuer qualifies as a small

issuer for purposes of such phased approach.

SEC. 4. SUSTAINABLE FINANCE ADVISORY COMMITTEE.

Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is amended by

adding at the end the following:

‘‘(k) S

USTAINABLE

F

INANCE

A

DVISORY

C

OMMITTEE

.—

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3

‘‘(1) E

STABLISHMENT

.—The Commission shall establish a permanent advisory

committee to be called the ‘Sustainable Finance Advisory Committee’ (in this

subsection referred to as the ‘Committee’).

‘‘(2) D

UTIES OF COMMITTEE

.—The Committee shall—

‘‘(A) submit a report to the Commission not later than 18 months after

the date of the first meeting of the Committee that—

‘‘(i) identifies the challenges and opportunities for investors associ-

ated with sustainable finance; and

‘‘(ii) recommends policy changes to facilitate the flow of capital to-

wards sustainable investments, in particular environmentally sustain-

able investments;

‘‘(B) when solicited, advise the Commission on sustainable finance; and

‘‘(C) communicate with individuals and entities with an interest in sus-

tainable finance.

‘‘(3) M

EMBERSHIP

.—

‘‘(A) M

EMBERS

.—

‘‘(i) I

N GENERAL

.—The Committee shall consist of no more than 20

members who shall each serve for one four-year term.

‘‘(ii) R

EPRESENTATION

.—Each member shall represent individuals and

entities with an interest in sustainable finance, such as—

‘‘(I) experts on sustainable finance;

‘‘(II) operators of financial infrastructure;

‘‘(III) entities that provide analysis, data, or methodologies that

facilitate sustainable finance;

‘‘(IV) insurance companies, pension funds, asset managers, de-

pository institutions, or credit unions; or

‘‘(V) other financial institutions that intermediate investments in

sustainable finance or manage risks related to sustainable develop-

ment.

‘‘(iii) R

EPRESENTATION OF INTERESTS

.—A member may not represent

a single individual or entity and shall represent types of individuals

and entities with similar interests in sustainable finance.

‘‘(B) S

ELECTION

.—

‘‘(i) I

N GENERAL

.—The Commission shall—

‘‘(I) publish criteria for selection of members on the website of

the Commission and in the Federal Register; and

‘‘(II) solicit applications for membership on the website of the

Commission and in the Federal Register.

‘‘(ii) E

QUAL SHARE

.—From the individuals who submit applications

for membership, each Commissioner of the Commission shall select an

equal number of the members of the Committee.

‘‘(C) P

AY

.—Members may not receive pay by reason of their service on the

Committee but may receive travel or transportation expenses in accordance

with applicable provisions under subchapter I of chapter 57 of title 5,

United States Code.

‘‘(D) M

EMBER TRANSPARENCY

.—The name of each member and the types

of individuals and entities that such member represents shall be published

on the website of the Commission.

‘‘(E) S

TAFF

.—The Committee shall be supported by staff from the Office

of the Investor Advocate of the Commission that are dedicated to environ-

mental, social and governance (in this subsection referred to as ‘ESG’)

issues.

‘‘(F) A

UTHORIZATION OF APPROPRIATION

.—There are authorized to be ap-

propriated such sums as are necessary to finance costs associated with staff

dedicated to ESG issues in the Office of the Investor Advocate of the Com-

mission.

‘‘(4) S

USTAINABLE FINANCE

.—For the purposes of this subsection, the term

‘sustainable finance’ means the provision of finance with respect to investments

taking into account environmental, social, and governance considerations.

‘‘(5) SEC

RESPONSE

.—The Commission shall, not later than 6 months after the

date on which the Committee submits a report to the Commission pursuant to

paragraph (2)(A), publish a response to such report.’’.

P

URPOSE AND

S

UMMARY

On February 18, 2021, Representative Juan Vargas introduced

H.R. 1187, the ESG Disclosure Simplification Act of 2021, which

would require issuers to disclose to shareholders certain environ-

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