Sustainable Finance Lobbying Overview: The Securities Industry and Financial Markets Association (SIFMA) appears to have had mixed engagement with regard to sustainable finance, generally stating top-line support for sustainable finance initiatives while outlining objections to specific policies.
Top-Line Messaging on Sustainable Finance Policy: SIFMA has stated support for the role of finance in achieving the goals of the Paris Agreement but has emphasized that private-sector innovation and real economy policies should be the primary means of driving the transition to a low-carbon economy. SIFMA has outlined its objections to sustainable finance efforts in the US and EU.
Position on Regulated Corporate ESG Disclosure: In a 2020 white paper SIFMA appeared to support the development of climate-related disclosure frameworks in line with TCFD recommendations, and in a 2020 blog post CEO Kenneth Bentsen called for mandatory disclosure of “corporate-specific, financially material, decision-relevant data relating to climate risks and opportunities.” In a 2021 letter to the SEC, SIFMA appeared to support the need for regulated corporate ESG disclosure informed by the TCFD and other regulatory bodies, albeit with a phased-in approach. However, in a 2021 response to a TCFD consultation SIFMA pushed back on the idea of mandating forward-looking climate-related financial metrics. Additionally, after the SEC released its proposed climate disclosure rule in 2022, CEO Kenneth Bentsen expressed concern with some aspects of the proposal including Scope 3 disclosures, “limited” safe harbors, and implementation timelines. Bentsen subsequently authored an opinion piece and a blog post that took issue with the SEC’s climate disclosure rulemaking.
In its comments to the SEC on the climate disclosure proposal in June 2022, SIFMA advocated for more narrow Scope 3 disclosure requirements and opposed the financial metrics disclosure provisions. SIFMA’s Asset Management Group also submitted comments on the SEC rulemaking, opposing mandatory Scope 3 disclosures and suggesting that requirements to disclose scenario analysis and climate-related goals would deter registrants from taking those steps. In July 2022 comments on the International Sustainability Standards Board’s draft climate and sustainability disclosure standards, SIFMA opposed Scope 3 disclosure requirements and advocated for flexibility in qualitative climate risk disclosures. In August 2022, SIFMA, along with the American Bankers Association, the California Bankers Association, and the Bank Policy Institute, sent a letter to the California State Assembly that stated opposition to SB 260, a bill that would require Scopes 1, 2, and 3 emissions disclosure from companies operating in the state. The bill subsequently did not pass.
Position on Taxonomies and ESG Standards/Labels/Benchmarks: In 2020, SIFMA stated opposition to the expansion of the EU taxonomy to environmentally harmful activities, cautioning that such a designation could risk stranded assets. In feedback to the European Commission on the Renewed Sustainable Finance Strategy in 2020, SIFMA cautioned against new ESG labels for investment funds and mandatory implementation of ESG benchmarks. In 2022 comments to the UK Financial Conduct Authority (FCA) on Sustainability Disclosure Requirements (SDR) and investment labels, SIFMA advocated for increased ambition for some standards and asked for the removal and watering down of other criteria. In comments on the updated SDR and investment labels consultation in January 2023, SIFMA outlined several concerns with the proposal, not supporting "channels" to achieve sustainability outcomes and advocating that the "Sustainable Impact" label be made more broad.
SIFMA has expressed objections to the SEC’s efforts to standardize and regulate ESG-related funds. In August 2022 comments on the SEC’s Names Rule proposal, SIFMA did not support extending the Names Rule and its 80% investment policy to funds that indicate an ESG strategy. In comments on the SEC’s proposed ESG disclosures for investment advisers and companies, also in August 2022, SIFMA supported the introduction of categories for ESG-related funds but expressed some concerns with the proposed definitions for these categories.
Position on Incorporating ESG Factors Into Investor Duties: SIFMA appears to have taken mixed positions on the incorporation of ESG factors into investor duties. In comments to the European Supervisory Authorities in 2020 SIFMA argued for less restrictive ESG disclosure requirements, and in comments on the European Commission’s renewed sustainable finance strategy SIFMA opposed adopting rules that would require fiduciaries to consider the adverse impacts of investment decisions on the environment and sustainability. In comments to the FCA in 2022 and 2023, SIFMA did not support a requirement for investment advisors to consider sustainability in investment advice and decision making, and opposed requirements to disclose trade-offs or adverse environmental or social impacts and set Key Performance Indicators (KPIs). In 2022 comments to the European Securities and Markets Authority, SIFMA took issue with some of the guidelines on certain aspects of the MiFID suitability requirements, emphasizing that sustainability considerations should be of secondary importance, and in 2022 comments to the European Commission SIFMA did not support extending entity-level disclosure requirements under the Sustainable Finance Disclosure Regulation (SFDR) to non-EU alternative investment fund managers.
However, SIFMA opposed both of the 2020 US Department of Labor rules that sought to limit shareholder rights and ESG investing, arguing that ESG considerations are important when evaluating long-term investments, and voiced support for a bill that would solidify the legal ability of workplace retirement plans to consider ESG factors in their investment decisions. In 2021, when the Department of Labor proposed a rule that sought to overturn Trump-era rulemaking on ESG investing, SIFMA issued a press release in support of the Department’s actions. However, in its comments on the rule, SIFMA asked the Department to alter and remove references to ESG considerations in the rule language. Additionally, in comments to the Department in May 2022, SIFMA advised against a requirement for fiduciaries to consider climate risks in retirement plan decision making. SIFMA and its Asset Management Group outlined several concerns with the SEC’s proposed ESG disclosure rules for investment advisers and investment companies, not supporting quantitative disclosure requirements related to proxy voting and engagement strategies and advocating for more tailored emissions disclosure requirements. However, in comments on the SEC’s Investment Company Names proposal in August 2022, SIFMA supported enhanced disclosure requirements for funds that use ESG terms in their names, including disclosure of the criteria the fund uses to select the investments the terms in its name describe.
Position on Incorporating ESG Factors Into Risk Management/Prudential Regulation: SIFMA appears to support the development of climate risk frameworks but has stated opposition to the use of prudential regulation for ESG issues and has cautioned against risk metrics that result in a list of environmentally harmful sectors or clients. In comments to the Office of the Comptroller of the Currency in 2022, SIFMA welcomed efforts to establish supervisory guidance on managing climate risks, but advocated for a flexible approach and emphasized data challenges. In comments to the Federal Deposit Insurance Corporation in 2022, SIFMA stated opposition to a requirement that financial institutions mitigate the impact their climate risk management has on the broader economy and expressed concerns about putting too much emphasis on the role of the board in determining risk appetite.