ESG – The Disclosure Debate Continues

The ESG debate continues, including within the SEC and amongst other regulators and industry participants.  Firmly in support of ESG disclosures, and especially climate change matters, is SEC Chair Gary Gensler and Commissioner Allison Herren Lee, while opposing additional regulation is Commissioners Eliad L. Roisman and Hester M. Peirce.  Regardless of whether new regulations are enacted (I firmly believe they are forthcoming), like all SEC disclosure items, the extent of disclosure will depend upon materiality.


The U.S. Supreme Court’s definition of materiality is that information should be deemed material if there exists a substantial likelihood that it would have been viewed by the reasonable investor as having significantly altered the total mix of information available to the public [TSC Industries, Inc. v. Northway, Inc.].  The concept of materiality represents the dividing line between information reasonably likely to influence investment decisions and everything else.

Rule 405 of the Securities Act defines “material” as “[T]he term material, when