ASA Submits Comment Letter on SEC’s ESG Proposed Rule

“It’s not lost on us that the lack of an ESG definition is more likely a feature than a bug associated with this new investment phenomenon."

WASHINGTON, D.C. – Today, the American Securities Association (ASA) sent a comment letter to the U.S. Securities Exchange Commission (SEC) regarding the Environmental, Social, and Governance (ESG) Disclosures for Investment Advisers and Investment Companies Proposal.

In the letter, ASA outlined the ramifications the proposed rule will have on long-term investors, including raising costs and increasing confusion and complexity around new disclosures.

“ASA is supportive of efforts to increase transparency and prohibit those engaging in ‘greenwashing’ or overstating their ESG-related portfolio, but current SEC regulations already prohibit this,” ASA CEO Chris Iacovella said. “The SEC should utilize its existing authority rather than create a cumbersome reporting process that will increase disclosure volume, which may not be relevant, and needlessly impose costs on shareholders.”

ASA also highlighted the proposed rule’s notable failure to define “E”, “S”, or “G”, and emphasized the missing definition’s ambiguity for advisers seeking to interpret and comply with the rule.

“It’s not lost on us that the lack of an ESG definition is more likely a feature than a bug associated with this new investment phenomenon. We recognize the desire for flexibility as the ESG sector matures, but these disclosures won’t address the rapid expansion of issues that find their way into the ESG bucket,” Iacovella said.

ASA's comment letter also cited a FINRA Foundation/National Opinion Research Center survey, which “found that when making investment decisions, 54% of investors “never or rarely” consider environmental impacts and 44% “never or rarely” consider a companies’ actions or statements related to social issues. And a stunning 25% of investors also believe that “ESG” stands for “earnings, stock, growth.”