Corporate Governance Improvement and Investor Protection Act

IIB 117TH CONGRESS 1ST SESSION H. R. 1187 IN THE SENATE OF THE UNITED STATES JUNE 17, 2021 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs AN ACT To provide for disclosure of additional material information about public companies and establish a Sustainable Fi- nance Advisory Committee, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 2 HR 1187 RFS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Corporate Governance 2 Improvement and Investor Protection Act’’. 3 TITLE I—ESG DISCLOSURE 4 SIMPLIFICATION 5 SEC. 101. SHORT TITLE. 6 This title may be cited as the ‘‘ESG Disclosure Sim- 7 plification Act of 2021’’. 8 SEC. 102. FINDINGS. 9 Congress finds the following: 10 (1) The Securities and Exchange Commission 11 has broad authority to require the disclosure of in- 12 formation if such information is in the interest of, 13 or is material to investors. 14 (2) The Commission does not require companies 15 to disclose information related to environmental, so- 16 cial, and governance (‘‘ESG’’) matters, and does not 17 require companies to adhere to standards for dis- 18 closing such information. 19 (3) Investors have reported that voluntary dis- 20 closures of ESG metrics are inadequate. 21 (4) A rule requiring reporting and standardiza- 22 tion of ESG disclosures is in the interest of inves- 23 tors. 24 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 3 HR 1187 RFS (5) ESG matters are material to investors, and 1 the Commission must establish standards for disclo- 2 sure of such matters. 3 SEC. 103. ESG DISCLOSURES. 4 (a) IN GENERAL.—Section 14 of the Securities Ex- 5 change Act of 1934 (15 U.S.C. 78n) is amended by adding 6 at the end the following: 7 ‘‘(k) ESG DISCLOSURES.— 8 ‘‘(1) IN GENERAL.—Each issuer the securities 9 of which are registered under section 12 or that is 10 required to file annual reports under section 15(d) 11 shall disclose in any proxy or consent solicitation 12 material for an annual meeting of the share- 13 holders— 14 ‘‘(A) a clear description of the views of the 15 issuer about the link between ESG metrics and 16 the long-term business strategy of the issuer; 17 and 18 ‘‘(B) a description of any process the 19 issuer uses to determine the impact of ESG 20 metrics on the long-term business strategy of 21 the issuer. 22 ‘‘(2) ESG METRICS DEFINED.—In this sub- 23 section, the term ‘ESG metrics’ has the meaning 24 given the term in part 210 of title 17, Code of Fed- 25 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 4 HR 1187 RFS eral Regulations as amended pursuant to section 1 3(b) of the ESG Disclosure Simplification Act of 2 2021.’’. 3 (b) RULEMAKING.— 4 (1) IN GENERAL.—The Securities and Ex- 5 change Commission (in this Act referred to as the 6 ‘‘Commission’’) shall amend part 210 of title 17, 7 Code of Federal Regulations (or any successor there- 8 to) to— 9 (A) require each issuer, in any filing of the 10 issuer described in such part that requires au- 11 dited financial statements, to disclose environ- 12 mental, social, and governance metrics (in this 13 title referred to as ESG metrics); and 14 (B) define ESG metrics. 15 (2) SUSTAINABLE FINANCE ADVISORY COM- 16 MITTEE.—The Sustainable Finance Advisory Com- 17 mittee established pursuant to section 4(k) of the 18 Securities and Exchange Act of 1934 shall, not later 19 than 180 days after the date of the first meeting of 20 such Committee, submit to the Commission rec- 21 ommendations about what ESG metrics the Com- 22 mission should require issuers to disclose. 23 (3) MATERIALITY.—It is the sense of Congress 24 that ESG metrics, as such term is defined by the 25 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 5 HR 1187 RFS Commission pursuant to paragraph (1), are de facto 1 material for the purposes of disclosures under the 2 Securities Exchange Act of 1934 and the Securities 3 Act of 1933. 4 (4) INCORPORATION OF INTERNATIONAL 5 STANDARDS.—When amending part 210 of title 17, 6 Code of Federal Regulations (or any successor there- 7 to) pursuant to paragraph (1), the Commission may, 8 as the Commission determines appropriate, incor- 9 porate any internationally recognized, independent, 10 multi-stakeholder environmental, social, and govern- 11 ance disclosure standards. 12 (5) LOCATION OF DISCLOSURE.—Any disclosure 13 required by paragraph (1) may be included in a 14 notes section of the filing. 15 (6) DELAY FOR SMALL ISSUERS.—The Commis- 16 sion may use a phased approach when applying any 17 amendments made pursuant to paragraph (1) to 18 small issuers and may determine the criteria by 19 which an issuer qualifies as a small issuer for pur- 20 poses of such phased approach. 21 SEC. 104. SUSTAINABLE FINANCE ADVISORY COMMITTEE. 22 Section 4 of the Securities Exchange Act of 1934 (15 23 U.S.C. 78d) is amended by adding at the end the fol- 24 lowing: 25 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 6 HR 1187 RFS ‘‘(k) SUSTAINABLE FINANCE ADVISORY COM- 1 MITTEE.— 2 ‘‘(1) ESTABLISHMENT.—The Commission shall 3 establish a permanent advisory committee to be 4 called the ‘Sustainable Finance Advisory Committee’ 5 (in this subsection referred to as the ‘Committee’). 6 ‘‘(2) DUTIES OF COMMITTEE.—The Committee 7 shall— 8 ‘‘(A) submit a report to the Commission 9 not later than 18 months after the date of the 10 first meeting of the Committee that— 11 ‘‘(i) identifies the challenges and op- 12 portunities for investors associated with 13 sustainable finance; and 14 ‘‘(ii) recommends policy changes to fa- 15 cilitate the flow of capital towards sustain- 16 able investments, in particular environ- 17 mentally sustainable investments; 18 ‘‘(B) when solicited, advise the Commission 19 on sustainable finance; and 20 ‘‘(C) communicate with individuals and en- 21 tities with an interest in sustainable finance. 22 ‘‘(3) MEMBERSHIP.— 23 ‘‘(A) MEMBERS.— 24 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 7 HR 1187 RFS ‘‘(i) IN GENERAL.—The Committee 1 shall consist of no more than 20 members 2 who shall each serve for one four-year 3 term. 4 ‘‘(ii) REPRESENTATION.—Each mem- 5 ber shall represent individuals and entities 6 with an interest in sustainable finance, 7 such as— 8 ‘‘(I) experts on sustainable fi- 9 nance; 10 ‘‘(II) operators of financial infra- 11 structure; 12 ‘‘(III) entities that provide anal- 13 ysis, data, or methodologies that fa- 14 cilitate sustainable finance; 15 ‘‘(IV) insurance companies, pen- 16 sion funds, asset managers, depository 17 institutions, or credit unions; or 18 ‘‘(V) other financial institutions 19 that intermediate investments in sus- 20 tainable finance or manage risks re- 21 lated to sustainable development. 22 ‘‘(iii) REPRESENTATION OF INTER- 23 ESTS.—A member may not represent a 24 single individual or entity and shall rep- 25 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 8 HR 1187 RFS resent types of individuals and entities 1 with similar interests in sustainable fi- 2 nance. 3 ‘‘(B) SELECTION.— 4 ‘‘(i) IN GENERAL.—The Commission 5 shall— 6 ‘‘(I) publish criteria for selection 7 of members on the website of the 8 Commission and in the Federal Reg- 9 ister; and 10 ‘‘(II) solicit applications for 11 membership on the website of the 12 Commission and in the Federal Reg- 13 ister. 14 ‘‘(ii) EQUAL SHARE.—From the indi- 15 viduals who submit applications for mem- 16 bership, each Commissioner of the Com- 17 mission shall select an equal number of the 18 members of the Committee. 19 ‘‘(C) PAY.—Members may not receive pay 20 by reason of their service on the Committee but 21 may receive travel or transportation expenses in 22 accordance with applicable provisions under 23 subchapter I of chapter 57 of title 5, United 24 States Code. 25 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 9 HR 1187 RFS ‘‘(D) MEMBER TRANSPARENCY.—The 1 name of each member and the types of individ- 2 uals and entities that such member represents 3 shall be published on the website of the Com- 4 mission. 5 ‘‘(E) STAFF.—The Committee shall be 6 supported by staff from the Office of the Inves- 7 tor Advocate of the Commission that are dedi- 8 cated to environmental, social and governance 9 (in this subsection referred to as ‘ESG’) issues. 10 ‘‘(F) AUTHORIZATION OF APPROPRIA- 11 TION.—There are authorized to be appropriated 12 such sums as are necessary to finance costs as- 13 sociated with staff dedicated to ESG issues in 14 the Office of the Investor Advocate of the Com- 15 mission. 16 ‘‘(4) SUSTAINABLE FINANCE.—For the pur- 17 poses of this subsection, the term ‘sustainable fi- 18 nance’ means the provision of finance with respect 19 to investments taking into account environmental, 20 social, and governance considerations. 21 ‘‘(5) SEC RESPONSE.—The Commission shall, 22 not later than 6 months after the date on which the 23 Committee submits a report to the Commission pur- 24 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 10 HR 1187 RFS suant to paragraph (2)(A), publish a response to 1 such report.’’. 2 SEC. 105. STUDY ON SHAREHOLDER COLLECTIVE ACTION. 3 Not later than 1 year after the date of the enactment 4 of this Act, the Securities and Exchange Commission 5 shall— 6 (1) conduct a study on— 7 (A) the emergence, viability, and signifi- 8 cance of coalitions of shareholders who wish to 9 preserve and promote critical employment and 10 ESG standards; 11 (B) whether and to what extent share- 12 holder collective action— 13 (i) occurs; and 14 (ii) has implications with respect to 15 filing requirements under the Securities 16 Exchange Act of 1934 (15 U.S.C. 78a et 17 seq.); and 18 (C) any possible anticompetitive activities 19 associated with shareholder collective action; 20 and 21 (2) submit to Congress a report that includes— 22 (A) the findings of the study conducted 23 under paragraph (1); 24 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 11 HR 1187 RFS (B) guidance, which may include an ap- 1 proved list, of shareholder engagement activities 2 that are not considered to involve questions of 3 corporate control; and 4 (C) recommendations on regulatory safe 5 harbors for engagement with respect to sustain- 6 ability guardrails and similar restrictions on 7 portfolio company conduct with a goal of— 8 (i) preserving economic justice, envi- 9 ronmental systems, and social institutions; 10 and 11 (ii) otherwise protecting the common 12 interests of corporate shareholders and 13 stakeholders. 14 TITLE II—SHAREHOLDER 15 POLITICAL TRANSPARENCY 16 SEC. 201. SHORT TITLE. 17 This title may be cited as the ‘‘Shareholder Political 18 Transparency Act of 2021’’. 19 SEC. 202. FINDINGS. 20 Congress finds that— 21 (1) corporations make significant political con- 22 tributions and expenditures that directly or indi- 23 rectly influence the election of candidates and sup- 24 port or oppose political causes; 25 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 12 HR 1187 RFS (2) decisions to use corporate funds for political 1 contributions and expenditures are usually made by 2 corporate boards and executives, rather than share- 3 holders; 4 (3) corporations, acting through boards and ex- 5 ecutives, are obligated to conduct business for the 6 best interests of their owners, the shareholders; 7 (4) historically, shareholders have not had a 8 way to know, or to influence, the political activities 9 of corporations they own; 10 (5) shareholders and the public have a right to 11 know how corporate managers are spending com- 12 pany funds to make political contributions and ex- 13 penditures benefitting candidates, political parties, 14 and political causes; and 15 (6) corporations should be accountable to share- 16 holders in making political contributions or expendi- 17 tures affecting Federal governance and public policy. 18 SEC. 203. REPORTING REQUIREMENTS. 19 Section 13 of the Securities Exchange Act of 1934 20 (15 U.S.C. 78m) is amended by adding at the end the 21 following: 22 ‘‘(s) REPORTING REQUIREMENTS RELATING TO CER- 23 TAIN POLITICAL EXPENDITURES.— 24 ‘‘(1) DEFINITIONS.—In this subsection: 25 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 13 HR 1187 RFS ‘‘(A) EXPENDITURE FOR POLITICAL AC- 1 TIVITIES.—The term ‘expenditure for political 2 activities’— 3 ‘‘(i) means— 4 ‘‘(I) an independent expenditure 5 (as defined in section 301(17) of the 6 Federal Election Campaign Act of 7 1971 (52 U.S.C. 30101(17))); 8 ‘‘(II) an electioneering commu- 9 nication (as defined in section 10 304(f)(3) of that Act (52 U.S.C. 11 30104(f)(3))) and any other public 12 communication (as defined in section 13 301(22) of that Act (52 U.S.C. 14 30101(22))) that would be an elec- 15 tioneering communication if it were a 16 broadcast, cable, or satellite commu- 17 nication; or 18 ‘‘(III) dues or other payments to 19 trade associations or organizations de- 20 scribed in section 501(c) of the Inter- 21 nal Revenue Code of 1986 and exempt 22 from tax under section 501(a) of that 23 Code that are, or could reasonably be 24 anticipated to be, used or transferred 25 VerDate Sep 11 2014 23:19 Jun 17, 2021 Jkt 019200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H1187.RFS H1187 pbinns on DSKJLVW7X2PROD with BILLS 14 HR 1187 RFS to another association or organization 1 for the purposes described in sub- 2 clause (I) or (II); and 3 ‘‘(ii) does not include— 4 ‘‘(I) direct lobbying efforts 5 through registered lobbyists employed 6 or hired by the [Text truncated for display. Full text available on Congress.gov.]