GAO Report May Spur Action on ESG ReportingBy
A new report from the Government Accountability Office (GAO) provides some impetus for either Congress or the U.S. Securities & Exchange Commission (SEC) to further financial reporting on environmental, social, and governance (ESG) policies.
Currently, the SEC only requires disclosure of ESG factors when they are considered “material.” Yet the GAO report, published in July 2020, said, “Institutional investors with whom we spoke generally agreed that ESG issues can have a substantial effect on a company’s long-term financial performance.”
The GAO commented on voluntary standards such as those from the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB), noting that, “the coexistence of competing, voluntary disclosure standards and frameworks has pros and cons.”
After the release of the GAO report, Sen. Mark Warner (D.-Va.), a member of the Senate Banking Committee, which has authority over accounting issues, said, “It is time that the SEC grapple directly with the metrics that GRI and SASB have developed—which researchers have consistently found to be material to company performance—and issue guidance on quantifiable and comparable disclosures.”