The U.S. Securities and Exchange Commission published remarks by Commissioner Hester M. Peirce arguing that the contemporary environmental, social, and governance (ESG) movement has pushed markets and regulators away from the SEC’s long-standing materiality-based disclosure regime. She said mandatory disclosure should be anchored to what is material to an investment decision, rather than treating ESG-labelled topics as inherently material. Peirce argued that ESG frameworks can redirect capital based on political and interest-group-driven taxonomies, impose one-size-fits-all metrics, and consume significant regulatory and corporate resources. She also linked expanded ESG disclosure to longer filings and higher litigation and enforcement risk, citing a recent case in which statements about the recyclability of coffee capsules resulted in a USD 1.5 million penalty. As evidence of a broader reassessment in the United States, she pointed to state scrutiny of asset managers’ ESG objectives, the U.S. Department of Labor’s planned rulemaking to rescind prior ESG rules, the SEC’s decision not to defend its climate disclosure rules in court, reduced momentum for an ESG proposal for investment advisers, and Commission staff’s rescission of shareholder proposal guidance in favor of analyzing a proposal’s policy issue and its significance to the relevant company. She recommended embedding an explicit commitment to materiality in the SEC rulebook and reviewing existing disclosure mandates to remove or modify requirements not rooted in materiality, while also urging European policymakers to streamline ESG rules and reconsider their extraterritorial effects on U.S. companies.
U.S. Securities & Exchange Commission 2025-06-05
U.S. Securities and Exchange Commission Commissioner Peirce urges materiality-first disclosure and rollback of ESG-driven mandates
SEC Commissioner Hester M. Peirce criticized the ESG movement for diverting focus from the SEC’s materiality-based disclosure regime, arguing that ESG frameworks impose uniform metrics and increase regulatory burdens. She highlighted risks of expanded ESG disclosures, including longer filings and higher litigation costs, and called for a commitment to materiality in SEC rules and a review of existing mandates. Peirce also urged European policymakers to streamline ESG rules and consider their impact on U.S. companies.