Existing rules already cover material climate risks is the first point she makes. What about the Private Securities Litigation Reform Act? He has testified before Congress and provided consulting services to the U.S. Department of Justice, the U.S. Department of Treasury, the New York Stock Exchange, and participants in financial markets, including hedge funds, investment banks, and private equity funds. 9300 Shelbyville Road, Suite1250, Louisville, KY 40222 (502) 327-8589. and lifetime income strategies . The proposal is well within the Commissions authority to adopt. To be sure, some elements of the SECs regulatory regime reflect a recognition that small or new public companies may not be as able to shoulder the costs of all disclosure requirements as older, larger companies. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); For Whom Corporate Leaders Bargainby Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forumhere); Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy A Reply to Professor Rock by Lucian A. Bebchuk, Alma Cohen, and Charles C. Y. Wang (discussed on the Forum here); Stakeholder Capitalism in the Time of COVID, by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Corporate Purpose and Corporate Competition by Mark J. Roe (discussed on the Forumhere). A company in possession of multiple sets of projections that are based on reasonable assumptions, reflecting different scenarios of how the companys future may unfold, would be on shaky ground if it only disclosed favorable projections and omitted disclosure of equally reliable but unfavorable projections, regardless of the liability framework later used by courts to assess the disclosures. How much standardization can be achieved across industries? Critiques on legal grounds fall far short of what would be needed for a court to overturn the rule. To be effective, he said, new SEC rules "must produce results that are useful, consistent, and comparable." It is not a transformative surprising regulatory departure, raising such a major question as to justify interpretive methods other than those of a faithful agent of Congress. Because, finally, the disclosures are financial and do not extend to the large part of the economy owned by private companies, they would not constitute general climate change policy, such as a carbon tax or emissions cap-and-trade scheme. Empirical studies of financial markets and regulation have always had strong and inherent methodological limits, well-known and not seriously disputed, as well as data limitations. 30, 2021). John Coates failed to apologise for his comments towards Annastacia Palaszczuk. In its overall framework, the proposed rule builds on the Task Force on Climate Related Financial Disclosure (TCFD), whose leadership includes the CFO of Unilever, the General Manager of Mitsubishi, and the former CAO of HSBC, and whose work has been supported by Bank of America, Barrick Gold, Dupont, Hewlett Packard, and Pepsico, among scores of other companies. The long-recognized fact the statutes were remedial laws following the Crash of 29. After the de-SPAC, the entity carries on its operations as a public company. For example, the famous phrase full and fair disclosure is in the full title to the 1933 Act, and so part of its statutory meaning. John C. Coates, IV, Lucian A. Bebchuk, John C. Coffee, Bernard S. Black, . P.C. 104-369, 43 (November 28, 1995) (Congress created the safe harbor provision to enhance market efficiency by encouraging companies to disclose forward-looking information.). And earlier this month, Bloomberg reported that John Coates, the SEC's Acting Director of the Division of Corporation Finance, indicated that new disclosure requirements would focus on three areas: diversity, equity and inclusion; climate change; and human capital management. John Coates Acting Director, Division of Corporation Finance March 11, 2021 Statement Published in Connection with Remarks at the 33rd Annual Tulane Corporate Law Institute [1] Not long ago, the title of this statement would have needed to unpack "ESG" into Environmental, Social and Governance. Any simple claim about reduced liability exposure for SPAC participants is overstated at best, and potentially seriously misleading at worst. ESG Disclosure - Keeping Pace with Developments Affecting Investors Join Facebook to connect with John Coates and others you may know. As noted above, the JOBS Act, for example, limited the full requirements in Section 7 for emerging growth companies, but left the Commissions overall authority to require disclosure for other public companies intact. Throughout I describe rather than argue for what the law should be. Financial reporting quality appears to have gone up after SOX but research on causal attribution is weak. To make their case, they distort the proposed rule beyond any fair reading, into a new, fictional rule that addresses environmental concerns rather than investor concerns. Nothing at stake in this proposed rule justifies such judicial lawmaking. When the only dissenting Commissioners primary basis for dissenting is that the Commission has already addressed the topic in prior rulemakings upheld by courts, courts have no basis for using one discretionary canon to apply personal policy judgments on a topic within the Commissions conventional and textually clear statutory authority. A topic of a disclosure is political, or controversial, or is not uncontroversially for investor protection, any of which would only invite interest groups to politicize a topic in the hopes of later arguing it should be off limits for the Commission to address. It would have a relatively modest impact on the economy as a whole, and basically levels up disclosure requirements to disclosures already made by the majority of large companies. This list contains the names for all officeholders. It is not a rule, regulation, or statement of the SEC. The proposed rule does not call for opinion or controversial speech of the kind that raises First Amendment concerns. Disclosure means: "To . View the profiles of people named John Coates. Read fairly and dispassionatelynon-politically, one might saydisclosures specified by the rule are not about environmental impact, or climate change, but about financial risks and opportunities related to climate change. It only specifies disclosures, and does not regulate climate change, or regulate climate emissions. Professor of Law and Economics at Harvard Law School. A movement is afoot to impose cost-benefit analysis (CBA) on financial regulation (CBA/FR). Third and finally, one of the more interesting and challenging aspects of recent SPAC transactions is that the investors in the SPACs first public capital raise often redeem or sell their shares around the time of the business combination. Neither EPA nor any other federal agency has authority to elicit the full range of information about financial risks that would be provided to investors under this rule. Not long after Denise Coates convinced her family to bet big on internet gambling, the first . John Coates's research works | University of Cambridge, Cambridge (Cam The institutions included both passive index funds and actively managed funds, as well as pension funds and other kinds of institutions. The SEC is well equipped to lead and facilitate a discussion on when and how ESG risks and data must be disclosed, and how to create and maintain an effective ESG-disclosure system that would promote the disclosure of decision-useful, reliable and, where appropriate, globally comparable ESG information. John CoatesActing Director, Division of Corporation Finance. Banks and insurance companies are increasingly demanding similar information to make loans or underwrite policies. Statement (PDF) . STAY CONNECTED The Congress authorizes and directs that, to the fullest extent possible: (1) the policies, regulations, and public laws of the United States shall be interpreted and administered in accordance with the policies set forth in this chapter, and (2) all agencies of the Federal Government shall make available to States, counties, municipalities, institutions, and individuals, advice and information useful in restoring, maintaining, and enhancing the quality of the environment. John Coates, acting director of the SEC's Division of Corporation Finance, similarly stated in a recent speech that the "SEC should help lead the creation of an effective ESG disclosure system so companies can provide investors with information they need in a cost effective manner," noting in particular the task of adapting existing rules and Its creation was accomplished by Presidential directive, subsequently approved by Congress in 1984. Reporting requirements regarding emissions of all kinds were a subsidiary authority given to EPA to supplement the more direct, substantive power to regulate the amount and type of emissions. The Commission is charged with protecting investors generally, and even if a subset of investors believe that they do not (or do) want or need particular information, their views should not necessarily control the Commission in the exercise of its expert judgment. John C. Coates - Harvard Law School Our existing disclosure regime, however, is already more nuanced than that, and there is no reason an ESG disclosure system would need to be less nuanced. Surveys of institutional investors published in peer-reviewed financial journals confirm this evidence. . If that risk drives choices about what information to present and how, it should not in my view be different in the de-SPAC process without clear and compelling reasons for and limits and conditions on any such difference. Clear statement canons play no role when statutes speak clearly. JOHN COATES, HARVARD LAW SCHOOL: Okay, thank you. When everything everyone owns can be sold at once, there must be confidence not to sell. There are 300+ professionals named "John Coates", who use LinkedIn to exchange information, ideas, and opportunities. ESG issues are global issues. [7] See, e.g., Chris Bryant, Why Chamath Palihapitiya Loves SPACs So Much, Bloomberg Opinion (January 28, 2021) (citing Haystack, Alignment Summit Chats: SPACS (w/ Chamath Palihapitiya), YouTube (Dec. 2, 2020) (statement of Chamath Palihapitiya) (Because the SPAC is a merger of companies, youre all of a sudden allowed to talk about the future. Statements about current valuation or operations have been viewed as outside the safe harbor by some courts, even if they are derived from or linked to forward-looking projections or statements. L. Sch. Financial disclosures released by former Secretary of State John Kerry indicate that until March of this year he held hundreds of thousands of dollars of investments in energy-related companies . John Coates does not need much of an introduction. Where do we go from here? It also illustrates the pace of ESG developments. Copyright 2023 ALM Global, LLC. Imposing further limiting principles may for some be appealing from a policy standpoint, but doing so has no basis whatsoever in the statutes text.. Congress, having made a fundamental policy judgment to require full and fair disclosure to protect investors, directed the Commission to make ongoing subsidiary choices of precisely what details of disclosure to require and when, after engaging in fact-finding and analysis that Congress chose not to try to do itself. Those involved should be accountable to relevant constituencies, including investors and companies. Although the rule is more limited than what an impact advocate would want, it is in one important way broader than anything EPA has adopted or is likely to have to power to implement: its geographic reach. First, while we should be mindful of the costs of new ESG disclosures, we must at the same time acknowledge the costs from the absence of a consensus ESG-focused disclosure system. The SEC should help lead the creation of an effective ESG disclosure system so companies can provide investors with information they need in a cost effective manner. Cost-Benefit Analysis of Financial Regulation: Case Studies and It does not impose a carbon tax or create a cap-and-trade regime. 51283 (Mar. Importantly, supporting letters came from many public companies (e.g., Adobe; Bank of America; BNP Paribas; Chevron; Dow Credit Suisse; Etsy; Microsoft; Paypal; Salesforce.com). Sydney Olympics 'bought to a large extent' said organiser John Coates Indeed, the actual proposed rule requires disclosure about subject matters long covered by indisputably authorized disclosure requirementsthe first point made by Commissioner Peirce in her dissent. Asbestos-related disclosure is a great example. What is proposed is to not to add new subject matters to public company disclosures, but to refine the mode and detail of already-required disclosures. John Coates, the Divisions current Acting Director, has been named SEC General Counsel. Yet no one has ever successfully argued that the Commission should not develop, adapt or apply disclosure rules to banks, mining companies, asset-backed issuers, airlines or defense contractors, despite the specialized knowledge that a full understanding of those companies would require, and despite the fact that the Commission does not have full-time staff who are themselves experts of the same kind that other regulators may have, or which companies hire to provide them with advice about such topics. In simple terms, the PSLRA excludes from its safe harbor initial public offerings, and that phrase may include de-SPAC transactions. As discussed in Point I, critics of the rule cannot plausibly attack premise one. SEC Signals ESG Initiatives with Two Picks for Senior Positions