Big tech groups try to dilute ESG disclosure rules

Microsoft and Alphabet, two of the most popular companies with investors focused on environmental, social and governance issues, are trying to maintain ESG disclosures of regulatory documents for fear of legal risks.

ESG positions of tech companies, submitted to the US Securities and Exchange Commission in recent days, have sparked a battle with Pimco, Invesco and other large asset managers who want ESG information included in filings annual regulatory 10-K. The SEC is considering making disclosures mandatory and examining where they should be made.

Josh Zinner, managing director of the Interfaith Center on Corporate Responsibility, which includes faith-based organizations and other ESG-minded investors, said such disclosures would create “a more level playing field and underscore the leadership of these organizations. companies ”.

Microsoft and Alphabet, he said, “are positioning themselves as leaders in sustainable development and they should certainly support mandatory disclosure of ESG matters, including in their regulatory files where they would be responsible for the content of that information.”

The battle between asset managers and companies over ESG disclosure is expected to intensify in the coming months. With global warming and human rights posing new risks for companies, the SEC has embarked on unprecedented disclosure regulation for the burgeoning ESG industry.

In 2021, nearly a third of global equity inflows were invested in ESG funds, Bank of America said in a June 1 report. Assets under management of ESG funds hit a record $ 1.4 billion in April, more than double the level of a year ago and increasing to almost 3 times the rate for non-ESG assets, said the bank.

Microsoft and Alphabet have taken advantage of this push. Microsoft is the most widely owned company in US ESG funds, Bank of America said. Alphabet is among the top 10 most popular ESG companies and is owned in almost half of all US ESG funds, BoA said.

Alphabet joined other tech companies on an SEC letter last week, which recommended that ESG information “be provided via separate climate reports to the SEC.”

“Since climate disclosures are based on estimates and assumptions that involve inherent uncertainty, it is important not to expose companies to undue liability, including from private parties,” the companies said.

If companies fear being sued, it could undermine the SEC’s overall goal of providing more ESG data to the market, said Patrick Flynn, vice president of sustainability at Salesforce, one of the signatories to the agreement. letter. “This is a new process for companies to follow, and they will have to establish new procedures. Allow some sort of refuge from liability. . .[allows]companies to push voluntarily and not just to do the bare minimum. “

In a statement, Microsoft said his letter SEC was not intended to imply that climate disclosures remain entirely out of SEC records. He said his cycle of compiling and verifying climate data may not match year-end financial statements.

While it will continue to provide ESG information outside of the SEC files, Microsoft said that “we believe climate disclosures in the SEC files should be limited to information material to an investment or voting decision. concerning the company “.

Alphabet declined to comment.

“While it’s great to see ESG executives from companies advocating for the SEC to adopt climate disclosure standards, we disagree with their claim that such disclosures should not conform to current standard documents from SEC, such as 10-K, 10-Q or proxy statement, ”said Molly Betournay, director of shareholder advocacy at Clean Yield Asset Management, which manages $ 450 million in assets. “Standard climate reports should be included in regular SEC records. “

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