The House Financial Services Committee voted today to pass HR 4329, the “ESG Disclosure Simplification Act.” The bill:
Requires companies to disclose, in their proxy materials, a discussion of the link between ESG metrics and their long-term business strategy and a description of any process used by the company to determine that connection;
Requires the SEC to define ESG metrics and require companies to disclose the metrics along with their audited financial statements;
Creates a Sustainable Finance Advisory Committee to make recommendations to the SEC about the ESG metrics that should be disclosed;
States that ESG factors, as defined by the SEC, are “de facto” material under securities laws; and
Permits the SEC to incorporate TCFD or other international standards.
Today’s vote represents an important step forward in the US policy conversation around sustainable finance. The ESG Disclosure Simplification Act is the latest addition to the list of ESG disclosure bills the House Financial Services Committee has passed this Congress. In July, the Committee passed the Climate Risk Disclosure Act, which would create a comprehensive framework for public company disclosure of climate-related risks basis. These bills, taken together, begin to lay the foundation of a comprehensive ESG disclosure framework for US public companies.
In order for these bills to become law, however, they must pass the US House of Representatives and the US Senate and then be signed into law by the President.