Dec. 13, 2021
Gary Gensler, Chair
SEC Headquarters
100 F Street, NE
Washington, DC 20549
Vanessa A. Countryman
Secretary, Securities and Exchange Commission
100 F Street NE
Re: Climate and ESG Rules Should be Written by SEC Not Outside Party
Dear Chairman and Secretary:
The Center for American Progress (CAP) and the Consumer Federation of
America (CFA) today released a joint report,
https://protect2.fireeye.com/v1/url?k=99150386-c68e3a99-9915e730-8630ffab37ab-82adeb6bfbc6005d&q=1&e=8cb9fd6f-6f7a-4436-a72b-e709951705a9&u=https%3A%2F%2Fconsumerfed.org%2Fwp-content%2Fuploads%2F2021%2F12%2FThe-SEC-Should-Write-Its-Own-Environmental-Social-and-Governance-Rules-December-2021.pdf,
recommending that the SEC develop and maintain climate and other
environmental, social and governance disclosure standards itself rather
than delegating such authority to one or more private third parties.
This report offers a careful review of the SEC’s options regarding
pathways to leverage external ESG standard setters, but in the end the
clear consensus was that a standard setting process that is carried out
internally by the Commission is the best avenue to ensure
decision-useful standards for investors, and importantly, to produce a
politically and legally durable ESG disclosure framework.
The SEC must write climate and other ESG rules itself in order to avoid
the many legal risks of delegating standard setting authority to a third
party. Further, rules developed and maintained by the SEC are more
likely to satisfy investors’ demands for information in a timely and
fair manner. It just makes sense for the SEC to write its own climate
and other ESG standards.
The primary question this report set out to answer was initially posed
by then Acting SEC Chair Allison Herren Lee in her March 15, 2021,
request for information on climate-related financial disclosure:
“…whether the Commission should designate an external third party to
carry out the function of establishing ESG-related disclosure standards.”
The report reflects the thorough analysis of extensive comments filed
in response to this question and identifies three principal variations
on third party delegation that commenters advanced:
Full delegation of disclosure standard setting to an external third
party, including updating of those standards;
Partial or hybrid delegation of standard setting in which the SEC
would set core principles and designate compliance with one or more
third-party standards as sufficient to meet reporting obligations; and
Incorporation by reference of existing third-party standards into
the SEC’s own rules.
After reviewing these options side-by-side with relevant legal and
policy precedents, as well as the agency’s own history of delegated
standard setting, the report’s authors ultimately determined that none
of these options were likely to be as effective or resilient as keeping
the ESG standard setting process fully in-house with the SEC and its staff.
The report acknowledges that there is, and will continue to be, a
critically important role for the private third parties that have
heretofore been the key drivers of ESG disclosure frameworks, through
both the continued development of standards above and beyond the SEC’s
requirements and ongoing analysis and public comments on SEC-mandated
ESG rules.
Take time to review this report and give it the weight it deserves.
Yours sincerely,
Robert E. Rutkowski
cc:
Director of Presidential Correspondence
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
2527 Faxon Court
Topeka, Kansas 66605-2086