ESG Disclosure Simplification Act of 2019

IB Union Calendar No. 290 116TH CONGRESS 2D SESSION H. R. 4329 [Report No. 116–365] To provide for disclosure of additional material information about public companies and establish a Sustainable Finance Advisory Committee, and for other purposes. IN THE HOUSE OF REPRESENTATIVES SEPTEMBER 13, 2019 Mr. VARGAS (for himself and Mr. GARCI´A of Illinois) introduced the following bill; which was referred to the Committee on Financial Services JANUARY 7, 2020 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed [Strike out all after the enacting clause and insert the part printed in italic] [For text of introduced bill, see copy of bill as introduced on September 13, 2019] VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 4329 RH A BILL To provide for disclosure of additional material information about public companies and establish a Sustainable Fi- nance Advisory Committee, and for other purposes. VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6652 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 4329 RH Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘ESG Disclosure Sim- 4 plification Act of 2019’’. 5 SEC. 2. ESG DISCLOSURES. 6 (a) IN GENERAL.—Section 14 of the Securities Ex- 7 change Act of 1934 (15 U.S.C. 78n) is amended by adding 8 at the end the following: 9 ‘‘(k) ESG DISCLOSURES.— 10 ‘‘(1) IN GENERAL.—Each issuer the securities of 11 which are registered under section 12 or that is re- 12 quired to file annual reports under section 15(d) shall 13 disclose in any proxy or consent solicitation material 14 for an annual meeting of the shareholders— 15 ‘‘(A) a clear description of the views of the 16 issuer about the link between ESG metrics and 17 the long-term business strategy of the issuer; and 18 ‘‘(B) a description of any process the issuer 19 uses to determine the impact of ESG metrics on 20 the long-term business strategy of the issuer. 21 ‘‘(2) ESG METRICS DEFINED.—In this sub- 22 section, the term ‘ESG metrics’ has the meaning 23 given the term in part 210 of title 17, Code of Federal 24 VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6203 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 4329 RH Regulations as amended pursuant to subsection (b) of 1 the ESG Disclosure Simplification Act of 2019.’’. 2 (b) RULEMAKING.— 3 (1) IN GENERAL.—The Securities and Exchange 4 Commission (in this Act referred to as the ‘‘Commis- 5 sion’’) shall amend part 210 of title 17, Code of Fed- 6 eral Regulations (or any successor thereto) to— 7 (A) require each issuer, in any filing of the 8 issuer described in such part that requires au- 9 dited financial statements, to disclose environ- 10 mental, social, and governance metrics (in this 11 Act referred to as ESG metrics); and 12 (B) define ESG metrics. 13 (2) SUSTAINABLE FINANCE ADVISORY COM- 14 MITTEE.—The Sustainable Finance Advisory Com- 15 mittee established pursuant to section 4(k) of the Se- 16 curities and Exchange Act of 1934 shall, not later 17 than 180 days after the date of the first meeting of 18 such Committee, submit to the Commission rec- 19 ommendations about what ESG metrics the Commis- 20 sion should require issuers to disclose. 21 (3) MATERIALITY.—It is the sense of Congress 22 that ESG metrics, as such term is defined by the 23 Commission pursuant to paragraph (2), are de facto 24 material for the purposes of disclosures under the Se- 25 VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 4329 RH curities Exchange Act of 1934 and the Securities Act 1 of 1933. 2 (4) INCORPORATION OF INTERNATIONAL STAND- 3 ARDS.—When amending part 210 of title 17, Code of 4 Federal Regulations (or any successor thereto) pursu- 5 ant to paragraph (1), the Commission may, as the 6 Commission determines appropriate, incorporate any 7 internationally recognized, independent, multi-stake- 8 holder environmental, social, and governance disclo- 9 sure standards. 10 (5) LOCATION OF DISCLOSURE.—Any disclosure 11 required by paragraph (1) may be included in a notes 12 section of the filing. 13 (6) DELAY FOR SMALL ISSUERS.—The Commis- 14 sion may use a phased approach when applying any 15 amendments made pursuant to paragraph (1) to 16 small issuers and may determine the criteria by 17 which an issuer qualifies as a small issuer for pur- 18 poses of such phased approach. 19 SEC. 3. SUSTAINABLE FINANCE ADVISORY COMMITTEE. 20 Section 4 of the Securities Exchange Act of 1934 (15 21 U.S.C. 78d) is amended by adding at the end the following: 22 ‘‘(k) SUSTAINABLE FINANCE ADVISORY COMMITTEE.— 23 ‘‘(1) ESTABLISHMENT.—The Securities and Ex- 24 change Commission (in this subsection referred to as 25 VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 4329 RH the ‘Commission’) shall establish a permanent advi- 1 sory committee to be called the ‘Sustainable Finance 2 Advisory Committee’ (in this subsection referred to as 3 the ‘Committee’). 4 ‘‘(2) DUTIES OF COMMITTEE.—The Committee 5 shall— 6 ‘‘(A) submit a report to the Securities and 7 Exchange Commission not later than 18 months 8 after the date of the first meeting of the Com- 9 mittee that— 10 ‘‘(i) identifies the challenges and op- 11 portunities for investors associated with sus- 12 tainable finance; and 13 ‘‘(ii) recommends policy changes to fa- 14 cilitate the flow of capital towards sustain- 15 able investments, in particular environ- 16 mentally sustainable investments; 17 ‘‘(B) when solicited, advise the Commission 18 on sustainable finance; and 19 ‘‘(C) communicate with individuals and en- 20 tities with an interest in sustainable finance. 21 ‘‘(3) MEMBERSHIP.— 22 ‘‘(A) MEMBERS.— 23 VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 4329 RH ‘‘(i) IN GENERAL.—The Committee 1 shall consist of no more than 20 members 2 who shall each serve for one four-year term. 3 ‘‘(ii) REPRESENTATION.—Each mem- 4 ber shall represent individuals and entities 5 with an interest in sustainable finance, 6 such as— 7 ‘‘(I) experts on sustainable fi- 8 nance; 9 ‘‘(II) operators of financial infra- 10 structure; 11 ‘‘(III) entities that provide anal- 12 ysis, data, or methodologies that facili- 13 tate sustainable finance; 14 ‘‘(IV) insurance companies, pen- 15 sion funds, asset managers, depository 16 institutions, or credit unions; or 17 ‘‘(V) other financial institutions 18 that intermediate investments in sus- 19 tainable finance or manage risks re- 20 lated to sustainable development. 21 ‘‘(iii) REPRESENTATION OF INTER- 22 ESTS.—A member may not represent a sin- 23 gle individual or entity and shall represent 24 VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6203 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 4329 RH types of individuals and entities with simi- 1 lar interests in sustainable finance. 2 ‘‘(B) SELECTION.— 3 ‘‘(i) IN GENERAL.—The Commission 4 shall— 5 ‘‘(I) publish criteria for selection 6 of members on the website of the Com- 7 mission and in the Federal Register; 8 and 9 ‘‘(II) solicit applications for mem- 10 bership on the website of the Commis- 11 sion and in the Federal Register. 12 ‘‘(ii) EQUAL SHARE.—From the indi- 13 viduals who submit applications for mem- 14 bership, each Commissioner of the Commis- 15 sion shall select an equal number of the 16 members of the Committee. 17 ‘‘(C) PAY.—Members may not receive pay 18 by reason of their service on the Committee but 19 may receive travel or transportation expenses in 20 accordance with applicable provisions under sub- 21 chapter I of chapter 57 of title 5, United States 22 Code. 23 ‘‘(D) MEMBER TRANSPARENCY.—The name 24 of each member and the types of individuals and 25 VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6203 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 4329 RH entities that such member represents shall be 1 published on the website of the Commission. 2 ‘‘(E) STAFF.—The Committee shall be sup- 3 ported by staff from the Office of the Investor 4 Advocate of the Commission that are dedicated to 5 environmental, social and governance (in this 6 subsection referred to as ‘ESG’) issues. 7 ‘‘(F) AUTHORIZATION OF APPROPRIA- 8 TION.—There are authorized to be appropriated 9 such sums as are necessary to finance costs asso- 10 ciated with staff dedicated to ESG issues in the 11 Office of the Investor Advocate of the Commis- 12 sion. 13 ‘‘(4) SUSTAINABLE FINANCE.—For the purposes 14 of this subsection, the term ‘sustainable finance’ 15 means the provision of finance with respect to invest- 16 ments taking into account environmental, social, and 17 governance considerations. 18 ‘‘(5) SEC RESPONSE.—The Commission shall, 19 not later than 6 months after the date on which the 20 Committee submits a report to the Commission pur- 21 suant to paragraph (2)(A), publish a response to such 22 report.’’. 23 VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS Union Calendar No. 290 116TH CONGRESS 2D SESSION H. R. 4329 [Report No. 116–365] A BILL To provide for disclosure of additional material in- formation about public companies and establish a Sustainable Finance Advisory Committee, and for other purposes. JANUARY 7, 2020 Reported with an amendment, committed to the Com- mittee of the Whole House on the State of the Union, and ordered to be printed VerDate Sep 11 2014 00:06 Jan 08, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6651 Sfmt 6651 E:\BILLS\H4329.RH H4329 pamtmann on DSKBC07HB2PROD with BILLS