On June 16, 2021, the U.S. House of Representatives passed H.R. 1187, the “ESG Disclosure Simplification Act of 2021” (“Act”), by a 215-214 vote. The Act, if passed by the U.S. Senate and signed into law by President Biden, would direct the U.S. Securities and Exchange Commission (“SEC” or “Commission”) to issue rules requiring public companies to disclose environmental, social, and governance (“ESG”) metrics in their proxy solicitations and audited financial statements. The Act would authorize the SEC to define “ESG metrics” and to incorporate internationally recognized standards in the definition. The House also expressed its view that ESG metrics are de facto material.
The Act would also establish a Sustainable Finance Advisory Committee (SFAC) at the Commission tasked with submitting recommendations to the Commission about which ESG metrics should be required to be disclosed and advising the Commission on sustainable finance matters, including policy changes that would direct the flow of capital towards sustainable investments.
The Act is the latest indication that SEC rulemaking regarding ESG disclosures is coming, and follows recent testimony by SEC Chair Gary Gensler that the Commission expects to propose ESG disclosure rules by the end of the year. More information, including the text of the Act, can be found here.