The COVID-19 pandemic has generated renewed interest from investors on environmental, social and governance (ESG) related issues. The rejuvenated interest comes as the U.S. Securities and Exchange Commission (SEC)’s Investor Advisory Committee made a recent recommendation calling for the SEC to “mandate the disclosure of ‘material, decision-useful, ESG factors’ as relevant to each company.” The desire for clearer guidance on ESG disclosure is expected as several ESG nonprofit and for-profit data providers have emerged in this growing market. According to a May 28 webinar hosted by the Sustainability Accounting Standards Board and the Society for Corporate Governance, these data providers fall into four groups: 1) “providers that publish guidance for voluntary ESG disclosure, often with company feedback”; 2) “providers that request data from companies using questionnaires and then based on the answers issue reports or ESG ratings”; 3) “providers that compile publicly available ESG data about companies and issue ESG ratings based only on that publicly available information”; and 4) “providers that create assessments of companies based on public and/or private information to sell to investors.” Members of the committee also expressed a concern that ESG disclosure forms are opaque and that the ESG metrics are too backward-looking, potentially leading to investors cherry-picking data points.

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