Field Notes: Sustainability in SEC Disclosures

Field Notes

Heron joins the discussion on SEC disclosures and the inclusion of sustainability factors that could help investors find companies with the best impacts on society.

Brent Fields, Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-0609

July 7, 2016

Reference: Concept Release on Business and Financial Disclosure Required by Regulation S-K File No. S7-06-16

Dear Secretary Fields:

The purpose of this letter is to provide commentary in response to the Securities and Exchange Commission Release No. 33-10064; 34-77599; File No. S7-06-16, BUSINESS AND FINANCIAL DISCLOSURE REQUIRED BY REGULATION S-K and to encourage the SEC to mainstream the integration of material sustainability information related to environmental, social and governance (ESG) factors in mandated SEC disclosures by issuers.

Heron’s mission is to help people and communities help themselves out of poverty. The foundation works with a diverse set of investment strategies focused on fostering economic innovations and practices that lead to long-term economic opportunity and prosperity for all.

For years, Heron has aligned an increasing portion of its assets with mission. In 2011, we fundamentally altered our strategy to focus primarily on investing in enterprises that create reliable income streams for all. We also look to invest in organizations that shift the metrics of the economy as a whole, by measuring the positive and negative social impacts of enterprises of all sizes and kinds, as well as by providing data standards and comparability for like-minded investors and managers.

Foundations like ours are increasingly implementing mission-related investment strategies that align the investments of our corpus with the mission of our foundation. Like other institutional investors, our investments have a long-term focus. Mission-aligned and long-term investments are mismatched with the current state of disclosure that is focused almost entirely on short-term financial results with little regard for the ability of corporations to to thrive alongside the societies in which they operate. The abilities of corporations to do so are increasingly influenced by sustainability-related factors that vary from industry to industry. With regard to the disclosure of sustainability-related information, the provisional standards of the Sustainability Accounting Standards Board (SASB) are a welcome addition to the disclosure landscape.

With respect to the SEC’s Concept Release inquiry on disclosure of sustainability-related information in SEC filings, we suggest that the SEC reference use of a market standard such as SASB standards as a way for companies to comply with disclosure requirements under U.S. securities laws. Key points are as follows:

  • More than ever, sustainability-related issues present challenges to the long-term prospects of corporations; we are among a growing body of “reasonable investors” seeking better transparency on corporate performance on these issues;
  • Most existing sustainability disclosure in the Form 10-K is boilerplate, which is not useful; we need a market standard for the disclosure of sustainability-related material information.
  • SASB standards should be referenced as the market standard for the disclosure of sustainability-related information in Commission filings. The industry-specific nature of information disclosed through SASB standards is particularly helpful as we aim to align our investments with our mission and a long-term investment horizon.

Thank you for the opportunity to comment on this release.
Sincerely,

Clara Miller
President, F.B. Heron Foundation

You can find more comments and support for sustainability disclosures here.


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