Microsoft and Alphabet, two of the most famous companies with investors focused on environmental, social and governance issues, seek to maintain ESG disclosures outside of regulatory information for fear of legal risk.
The ESG positions of technology companies, submitted to the U.S. Securities and Exchange Commission in recent days, have sparked a battle with Pimco, Invesco and other major wealth managers who want ESG information to be included in the 10-K annual regulatory announcements. The SEC plans to make disclosures mandatory and consider where they should be made.
Josh Zinner, chief executive of the Interfaith Center for Corporate Responsibility, which includes religious organizations and other investors in mind ESG, said such disclosures create a “more level playing field and highlight the leadership of these companies.”
Microsoft and Alphabet, he said, “position themselves as leaders in sustainability and should certainly support mandatory disclosure on ESG issues, including in their regulatory records where they will be responsible for the content of this information.”
The battle between asset managers and companies for ESG disclosure is expected to intensify in the coming months. With global warming and human rights posing new risks for companies, the SEC has launched an unprecedented disclosure regulation for the ESG sector boom.
By 2021, nearly a third of global capital flows will go into ESG funds, Bank of America said in a June 1 report. Activity under management in ESG funds hit a record $ 1.4 billion in April, more than double the level a year ago and grows to nearly 3 times the rate of non-assets ESG, the bank said.
Microsoft and Alphabet have taken advantage of this source. Microsoft is the most widely held company in ESG funds in the United States, said Bank of America. Alphabet is one of the top 10 most popular ESG companies and holds in nearly half of all U.S. ESG funds, BoA said.
Alphabet joins other technological societies in a letter SEC last week it recommended ESG disclosures “be provided via separate climate reports to the SEC.”
“Given that climate disclosures are based on estimates and assumptions that involve inherent uncertainties, it is important not to subject companies to improper liability, even from private parties,” the companies said.
If companies are concerned about being cited in the lawsuit, it could undermine the SEC’s overall goal of providing more ESG data to the market, said Patrick Flynn, vice president for sustainability at Salesforce, one of the signatories of the letter. “It’s a new process for companies to go through, and they have to establish new procedures. Allowing some sort of safe port of responsibility…[allows]and companies to push willingly and not just do the minimum ”.
In a statement, Microsoft said his SEC letter it was not intended to imply that climate disclosures would remain outside the SEC filings entirely. He said his cycle for compiling and verifying climate data could not be aligned with year-end budgets.
While continuing to provide ESG disclosures outside of SEC filings, Microsoft said “we believe that climate disclosures in SEC filings should be limited to information that is material for an investment or voting decision regarding the company.”
Alphabet declined to comment.
“While it’s nice to see the company’s ESG leaders supporting the SEC adopt climate disclosure standards, we disagree with their assertion that such disclosures should be outside of current SEC standard presentations such as the 10-K, 10-Q or proxy statement, ”he said. Molly Betournay, director of equity defense at Clean Yield Asset Management, which has $ 450m in assets under management. “Standard climate reporting should include regular filing with the SEC.”