In response to a 2018 request from Senator Mark Warner (D-VA) to review public company disclosure of ESG information, the GAO issued this report based on its interviews with 14 institutional investors* and its review and analysis of 32 large and mid-sized companies' SEC filings and voluntary sustainability reports (generally with 2018 data) across 33 ESG topics (see pages 20, 24).
Among the findings: 23 of the 32 companies disclosed on more than half of the 33 topics (in many cases based on company-specific risks and/or opportunities), with board accountability and workforce diversity among the most commonly reported topics and human rights the least, as shown here:
The GAO's review also explored and the report addresses why investors seek ESG disclosures and policy options to improve them, including legislative or regulatory actions (such as issue-specific ESG disclosure requirements, SEC endorsement of one or more ESG reporting framework(s), SEC guidance) and private sector approaches (such as industry-developed frameworks and stock exchange requirements). Potential upsides and downsides of each approach, including consensus/lack of consensus around what information should be disclosed, improved or diminished comparability across companies, and relevance/lack of relevance of particular types of disclosures for all companies, are also discussed.
The SEC's response (Appendix II) reiterates our materiality and principles-based disclosure scheme, as well as the SEC's ongoing efforts (including guidance and rulemaking) to facilitate effective disclosure across any and all company-specific relevant matters, including environmental, social or governance matters.
*See the methodology in Appendix I of the report; this Cadwalader post; and this Pensions & Investments article. This post first appeared in the weekly Society Alert!