U.S. House Advances Environmental, Social, Governance Disclosure Bill

Last week the U.S. House of Representatives advanced the first piece of legislation of the year regarding environmental, social, and governance (ESG). On Wednesday, April 21, the House Financial Services Committee passed H.R. 1187, the ESG Disclosure Simplification Act of 2021, by a party-line vote of 28-22.

The bill would amend the Securities Exchange Act of 1934 to require the Security and Exchange Commission (SEC) issue a regulation that defines ESG metrics and requires public companies disclose certain ESG metrics in annual filings with the SEC. Public companies would also be required to disclose a description of the company’s views “on the link between ESG metrics and long-term business strategy” in their proxy materials for annual shareholder meetings. This would include a description of the company’s process used to determine the effect of ESG metrics on the company’s business. Notably, the bill would allow the SEC to incorporate any “internationally recognized, independent, multi-stakeholder” ESG disclosure standards.

Separately, the bill would create a 20-member Sustainable Finance Advisory Committee. The committee would submit a report within 18 months that identifies challenges and opportunities for investors with sustainable finance and provides recommendations on policy changes that would encourage the flow of capital toward sustainable finance.

At this stage, there has been no indication from House leadership on whether, or when, the full House would vote on the bill. Sidley will continue to monitor this bill and related ESG activity on Capitol Hill.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.