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Source: Securities and Exchange Commission

Washington D.C.

Jan. 14, 2020

Thank, you. I’ll be brief so you can all get started with your important work. I second the remarks of my colleagues regarding how important the asset management industry is to American investors. Clients of all types—from retirees and retail investors to large institutions and pension plans—rely heavily on the people in this room and your colleagues to manage their finances, help them save and invest for the future, and exercise independent judgment in voting their shares. I want to thank Director Dalia Blass for helping to establish this Committee, and everyone in this room for your willingness to contribute your time and expertise.

There are many issues worthy of this Committee’s attention, and I look forward to your assessment of how best to spend your time and resources. I want to highlight one area of increasing significance to the investors you all serve: the ability to accurately assess, compare, and invest in companies with sound policies on sustainability, ethical business standards, and good governance. Evidence continues to mount regarding how critical this information is for investors in their decision-making process.[1] Indeed, a recent academic survey indicates that over half of the institutional investors surveyed globally considered climate risk disclosure, in particular, to be as important as traditional financial disclosure.[2] 

 Yet the Commission last addressed climate-related disclosure a decade ago.[3] I do not want to see us fall behind the rest of the world in ensuring that investors receive the sort of material information that the market is demanding.

As you start to think about this Committee’s agenda and how you can help both the Commission and the public, I hope you will consider some of the following issues. How can the Commission ensure that asset managers and their clients can meaningfully pursue their investment goals and have access to critical information related to climate risk and, more broadly, to ESG issues? What set of standards will best serve investors and asset managers in evaluating a company’s exposure to climate risk and assessing and pricing that risk? What should it mean when a fund calls itself an ESG fund? And how can the Commission and investors ensure that asset managers are not only investing in line with the long-term goals of their clients, but also voting in line with those goals?

Again, this is just one of a number of important areas where we will benefit from your expertise. I thank each of you for your time and dedication in helping the Commission better serve investors and the public. I look forward to your analysis and recommendations. 

 

[1] See, e.g., State Street Global Advisors, The ESG Data Challenge at 1 (Mar. 2019), https://www.ssga.com/investment-topics/environmental-social-governance/2019/03/esg-data-challenge.pdf (“Asset owners and their investment managers seek solutions to the challenges posed by a lack of consistent, comparable, and material information. Investors increasingly view material ESG factors as being critical drivers of a company’s ability to generate sustainable long-term performance. In turn, ESG data has increasing importance for investors’ ability to allocate capital most effectively.”); Letter from Larry Fink, Chairman & CEO, BlackRock to CEOs (Jan. 14, 2020), https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter (“Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk. Indeed, climate change is almost invariably the top issue that clients around the world raise with BlackRock . . . They are seeking to understand both the physical risks associated with climate change as well as the ways that climate policy will impact prices, costs, and demand across the entire economy. These questions are driving a profound reassessment of risk and asset values.”); U.S. SIF Foundation, Report on U.S. Sustainable, Responsible and Impact Investing Trends 2018 at 1 (2018) (“Sustainable, responsible and impact (SRI) investing in the United States continues to expand at a healthy pace. The total U.S.-domiciled assets under management using SRI strategies grew from $7.7 trillion at the start of 2016 to $12.0 trillion at the start of 2018, an increase of 38 percent. This represents 26 percent—or 1 in 4 dollars—of the $46.6 trillion in total U.S. assets under professional management.”).

[2] See Emirhan Ilhan et. al., Swiss Finance Institute Research Paper Series N. 19-66, Institutional Investors’ Views and Preferences on Climate Risk Disclosure at 4 (last revised Jan. 7, 2020), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3437178 (“We find that the survey respondents share a strong general belief that climate disclosure is important. In fact, 51% of respondents believe that climate risk reporting is as important as traditional financial reporting, and almost one-third considers it to be more important.”).

[3] See Commission Guidance Regarding Disclosure Related to Climate Change, Release No. 33-9106 (Feb. 8, 2010).

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