A Look Ahead to Upcoming SEC Votes and Proposed Rules on ESG

On June 13, the SEC published its Spring Regulatory Agenda. This document gives insight into the topics that the SEC commissioners and staff are working on, with targeted dates for voting and adoption. The latest update includes a few notable items relating to the ESG space.

The proposed rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which was originally published March of 2022, is now scheduled for a final vote in October 2023. The proposed rule for investment advisors and investment companies on ESG practices has also been scheduled for a final vote in October 2023. As part of the voting and adoption process, at the time that the commission votes, the final rules as adopted will be published. Once the final rules are published in the Federal Registrar, there is a 60-day waiting period until the rules are enacted. If the rules are adopted and published in October 2023, they will likely take effect in 2024.

In addition to the final adoption of the existing proposed rules, the SEC has indicated that they are working on other proposed rules. Specifically, in October 2023, they will release a proposed rule for public companies regarding the disclosure around human capital management practices. This would relate to the social component of ESG.

Looking ahead to April 2024, there is also a proposed rule for public companies relating to the disclosure of diversity of board members and board nominees, as well as proposed rules regarding payments for oil, gas and mining.

Finally, the SEC has also indicated that it is looking to amend the rules under Section 1504 of the Dodd-Frank Act. These rules relate to public companies disclosing payments made to governments for the extraction of oil, gas and mining. The rule was originally adopted by the SEC in 2012, but subsequently challenged in courts and vacated in 2013. A revised rule was adopted in 2016, but then disapproved by a joint resolution of Congress in 2017. A further revised rule was adopted and enacted in 2021. New proposed rule amendments are targeted for April 2024.

It is clear that the SEC has a continued focus on many angles of the environmental, social and governance aspects of public companies. Compliance with these rules, even in proposed format, takes time to implement in an efficient manner. Board members and senior management should be actively discussing the potential impact of these proposals with their teams to get ahead of the rulings.