Recently, the SEC issued its five-year strategic plan for public comment. This strategic plan covers a wide variety of topics, ranging from adapting to new technology to plans for increasing internal SEC workforce diversity. Significantly, this draft strategic plan stated that “the SEC must update its disclosure framework,” and highlighted three areas in which it should do so: “issuers’ climate risks, cybersecurity hygiene policies, and their most important asset: their people.”
The SEC has already undertaken steps to enact these proposed updates to its disclosure requirements for public companies. Notably, this past March it proposed draft climate disclosure rules, which provoked a significant response from the public–including widespread criticism from many companies (as well as praise from environmental organizations). The fact that the SEC chose to highlight these rules in its (draft) five-year strategic plan indicates the depth of the commitment it has made to these draft climate disclosures, and further suggests that the final form of the climate disclosures is unlikely to be significantly altered in substance from what the SEC has already proposed. This statement reinforces the commitment of Chairman Gensler’s SEC and the Biden Administration to financial disclosures as a method to combat climate change.
“The markets have begun to embrace the necessity of providing a greater level of disclosure to investors. From time to time, the SEC must update its disclosure framework to reflect investor demand. Today, investors increasingly seek information related to, among other things, issuers’ climate risks, cybersecurity hygiene policies, and their most important asset: their people. In order to catch up to that reality, the agency should continue to update the disclosure framework to address these areas of investor demand, as well as continue to take concrete steps to modernize the systems that support the disclosure framework, to make public disclosures easier to access and analyze and thus more decision-useful to investors. . . . Across the agency, the SEC must continually reassess its risks, including in new areas such as climate risk, and document necessary controls.”