The Securities and Exchange Commission pushed out the release date for three of its ESG-related regulations concerning greenwashing, human capital management and corporate board diversity.
The agency unveiled the updated timelines in its latest regulatory agenda Monday, which showcased the status of over 30 proposed rules. Among the most ESG-relevant updates, the SEC has postponed the release of a final rule to enhance ESG disclosures and a proposed rule improving how companies report their workforce and human capital management data to October 2024. Both proposed regulations were initially slated for an April release, according to the SEC’s previous regulatory agenda published last fall.
The delayed timelines have already faced criticism from Democratic lawmakers who have called on the agency to expedite its rulemaking process, and come against a backdrop of increased scrutiny regarding ESG-related regulations.
Earlier in May, a group of 21 Congressional Democrats sent a letter to SEC Chair Gary Gensler, asking the agency to finalize the “Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices” rule designed to combat greenwashing in ESG or similarly labeled funds. The group said finalizing the rule is “critical for addressing greenwashing and other exaggerated or unfounded ESG-related claims amongst funds and investment advisers.”
Similarly, in December, a pair of Democratic senators took issue with the SEC’s pace in releasing amendments to its proposed “Human Capital Management Disclosure” rule. Sens. Sherrod Brown and Mark Warner, of Ohio and Virginia respectively, penned the letter to the SEC and said they were “disappointed” to see the holdup in updating the rule which, at the time, was scheduled to be released this past spring. The senators also asked the agency to ensure the updated rule required companies to disclose temporary and contract workers, employee turnover data, employee compensation and benefits information, workforce health and safety information, and demographics data.
While the ESG greenwashing disclosures rule is in the final stage of rulemaking, the human capital management rule remains to be in the proposed rulemaking stage, per the SEC’s updated agenda.
The agency has also pushed out the timeline to propose a “Corporate Board Diversity” rule, which is now expected in April 2025. The rule was initially slated for October this year and aimed to increase disclosures on the diversity of corporate board members and nominees.
Given the revised timeline of the board diversity rule proposal, it is possible the release date could fall under a new administration, as a result of the 2024 presidential election cycle.
Implementation of the SEC’s long-awaited climate-risk disclosure rule is currently pending as well. The agency decided to stay the rule in April in the wake of several legal challenges questioning its authority to mandate such disclosures. Gensler previously told reporters the SEC had received over 24,000 comments since first proposing the rule in 2022.
“We benefit in all of our work from robust public input regarding proposed rule changes,” Gensler said in a press statement accompanying the SEC’s updated spring agenda.
