At the end of 2018, the US SIF Foundation identified $11.6 trillion in US-domiciled sustainable, responsible, and impact investment strategy assets, of which $8.6 trillion were managed on behalf of institutional investors and $3.0 trillion were managed on behalf of individual investors. [1],[2] Shareholder advocates as well as business journalists and legal and banking practitioners, and even SPAC enthusiasts themselves[3] are sounding alarms about the surge. . A public company might have a large amount of transition risk due to many different emission sources, each of which is below EPA thresholds. With this subscription you will receive unlimited access to high quality, online, on-demand premium content from well-respected faculty in the legal industry. For years, asbestos-related risks were invisible, and information about asbestos would likely have been called non-financial. Over time, those risks went from invisible to visible to extremely clear, and clearly financial. All Rights Reserved. But Coates will have his own financial . A draft of what would become the 1933 Act in the Senate included disclosure items directly in the statute, and did not contain the equivalent language later adopted in Section 7, which directs the Commission to go beyond that list (which is separate from the Commissions general rulemaking authority in Section 19). My remarks here do not attempt to answer those or the multitude of other questions about ESG disclosures. : John Dowling Coates 1950 57 - . But as some critics do ignore the plain language of the statute, it should be emphasized that they find no more support for the notion that the Commission lacks authority in the legislative history, or in generations of legislative, executive, and judicial understanding of the statutes meaning. 2007) (enjoining a merger because the proxy statement omitted the projections used to render the fairness opinion). Here, we survey research on steroid hormones and their cognitive. To be clear, in the initial offering by a SPAC, when the shell company is first raising funds to finance all (or more commonly a portion) of its hoped-for acquisition of the yet-to-be-named target, disclosures clearly have a role to play under the federal securities laws. He received his law degree from New York University Law School and his Bachelor of Arts with highest distinction from the University of Virginia. As regards climate change, environmental agencies might do well to focus on global activities as well, but it is unclear how EPA could with its existing legal authority impose requirements on companies not operating in the US. The 1933 Act does not limit additional disclosures to those that are related or similar to the items in Schedule A, or material, or financial, despite the fact that Congress frequently used those very qualifiers elsewhere in the statute. Does that provide de-SPAC participants with protections in private litigation that are not available in a conventional IPO? With the large pool of private capital available and the increase in Exchange Act Section 12(g) registration thresholds, a company can remain private and grow significantly without going through a traditional IPO. John Coates is a senior research fellow at the University of Cambridge. The United States Securities and Exchange Commission has focused increasingly on SPACs in recent months, and is particularly concerned with conflicts of interest that incentivize a SPAC's sponsors, directors, officers, and affiliates to close a de-SPAC transaction even when doing so is not in the best interests of SPAC shareholders, and whether Many ESG-related issues are similar to ones we have faced before. In the context of legislation that does not implicate fundamental rights or a suspect class, faithful enforcement of the Constitution requires a court to hew as closely as possible to the norm of faithful agency by enforcing the text unadulterated by judicial tweaking.. 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. For example, they point to the broader ESG movement and claim the fictional new rule requires disclosure about ESG, or about environmental impacts not relevant to investors. It does not address how to measure or use the social cost of carbon, as is done by other agencies. Although some are reluctant to consider legislative history or expert contemporaneous commentary in interpreting statutes, it is useful to do so briefly here for a simple reason. 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. [13] Nor is the safe harbor available unless forward-looking statements are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements. Finally, critics sometimes argue that investors do not need protection of mandatory climate-related financial disclosures because companies are already voluntarily making such information available. 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. .. The Court has stressed the structure and design of the 1933 and 1934 Acts reflect an understood need for regulatory flexibility, even in decisions limiting the reach of Commission rules where the precise limits of its authority are less clear, such as Rule 10b-5: Congress recognized that efficient regulation of securities trading could not be accomplished under a rigid statutory program. In numerous cases, the Court and lower courts have held that the federal securities laws are to be construed broadly, not technically and restrictively, but flexibly to effectuate its remedial purposes.. Apr. 51283 (Mar. LONDON, Oct 10 (Reuters) - When John Coates was on a winning streak during his days as a trader at Deutsche Bank and Goldman Sachs, the narcotic-like "high" he experienced was so powerful he was determined to find out more. In contrast to the specific mentions of these other federal agencies, the authorizing document, Reorganization Plan No. EPA has authority over private companies, while the Commissions proposed rule covers only public companies. Bloomberg reports that, according to Coates, the new disclosure requirements will focus on three topics: diversity, equity and inclusion; climate change; and human capital management. As background, noted in the proposing release, the Commission published a request for comment a year earlieron March 15, 2021so that its current process has already gone beyond the requirements of administrative law. Public Statement on ESG Disclosure On March 11, 2021, the SEC published a statement by John Coates, acting director of the SEC's Division of Corporation Finance, in connection with remarks given at the 33 rd Annual Tulane Corporate Law Institute (available here ). That is true for companies being acquired, as well as for companies going public. Where and how can disclosures be aligned with information companies already use to make decisions. And thank you very much for the invitation to be in a place I don't usually go, right? 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. They sometimes specifically point to the Private Securities Litigation Reform Act (PSLRA) safe harbor for forward-looking statements, and suggest or assert that the safe harbor applies in the context of de-SPAC transactions but not in conventional IPOs. Second, there may be advantages to providing greater clarity on the scope of the safe harbor in the PSLRA. . This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas. Join National Law Journal now! When everything everyone owns can be sold at once, there must be confidence not to sell. John CoatesActing Director, Division of Corporation Finance. The rule does not require them to use particular words, or characterize their own conduct in any controversial way. [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. It is also not a rule the EPA or any other regulatory agency has adopted or could legally adopt. Companies objectively do or do not have strategies that reflect transition risk or physical risks of climate change. We'll send you a myFT Daily Digest email rounding up the latest Denise Coates news every morning. Before joining the SEC, he served as the John F. Cogan Professor of Law and Economics at Harvard University, where he also was Vice Dean for Finance and Strategic Initiatives. In other words, the delegation to the Commission was deliberate, was specifically intended to apply to required disclosures, and was sensible, reflecting an anticipation that the Congress itself could not reasonably work out in detail the kinds of choices necessary to develop and keep up to date an appropriate disclosure regime. Again, some may view this company-calibrated focus as distracting, because the rule is not limited (for example) to industries that have the greatest environmental impact, such as oil and gas, or energy. Credit quality of loan portfolios requires expertise to understand in detail, which is typically found in bank regulatory agencies. The rule would create a framework for reliable disclosures of climate-related information that is potentially positive for investors, such as opportunities, and is not limited to risks. 2, 2021). E.g., Jeff Montgomery, SPAC Investor Sues in Chancery Over MultiPlans Stock Drop, Law360 (Mar. S190602 (daily ed. He had been serving as the independent monitor for the U.S.. Circuit Court of Appeals in 1979: the Commission has been vested by Congress with broad discretionary powers to promulgate (or not to promulgate) rules requiring disclosure of information beyond that specifically required by statute. As discussed in Point I, critics of the rule cannot plausibly attack premise one. I think it is only about 30 pages, while the British Companies Act is over 300 pages. It is against this backdrop that I think about the regulation of ESG disclosures. Not surprisingly, disclosure about these risks did not initially show up in SEC filings, but there too they went from invisible to increasingly disclosed. 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). In Delaware, as under SEC Rule 405, control can be found to exist raising the corporate law standard in state court review of conflict of interest transactions where a shareholder owns less than 50% of the stock, but exercises control over the business affairs of the corporation. This post is based on his recent comment letter. In this way, SPACs offer private companies an alternative pathway to go public and obtain a stock exchange listing, a broader shareholder base, status as a public company with Exchange Act registered securities, and a liquid market for its shares. 5 C.F.R. In this regard, the work of the IFRS Foundation to establish a sustainability standards board appears promising. In the budget rider, Congress made no mention of any other agency, nor can the text of that law be reasonably interpreted to displace any agencys authority. EPA is charged by Congress to have a concern for the environment, not for investors. Authority for disclosure under the 1934 Act addressed more than the need for protection of the initial investor acquiring securities. STAY CONNECTED The president's financial disclosure reports are extensively reviewed for potential or actual conflicts of interest and compliance with applicable laws and policies by the Chief Compliance and Ethics Officer of the Bank, and the Chairman of the Bank's board of directors. To do so would turn the doctrines purpose against itself, turn courts into unelected mini-legislatures, and subvert rather than reinforce the separation of powers. Finally, it is beyond argument that the Clean Air Act nowhere mentions the Commission much less modifies its disclosure authority. Forum on Corp. Gov. Those involved should be accountable to relevant constituencies, including investors and companies. Coates, recently finished work on a follow-up to the 1982 film to celebrate its . With that overview, I would like to focus on legal liability that attaches to disclosures in the de-SPAC transaction. Over that time, as noted above, the SEC proposed and adopted rules requiring environmental disclosures, in part to satisfy its obligations under NEPA. The legislative history includes statements that the safe harbor was meant for seasoned issuers with an established track-record.[16]. The status quo is costly for companies, and increasingly so over time. [10] See infra note 12. EPA only has authority over US emission sources. Where do we go from here? It addresses global climate risks to public companies, and not all climate risks created by domestic activities of all companies, public and private. It would not itself force any company to shut down greenhouse-gas-emitting factories. The reason is simple: the public knows nothing about this private company. In plain unambiguous text, they encompass financial risks and opportunities related to any source. If comprehensive, economy-wide disclosure of climate impacts of all types of business is to be required by regulation, doing so will require more than the Commissions authority. But Congress has never cut back on the Commissions general obligation to specify the contents of its disclosure regime, such as by editing or reversing prior disclosure specifications. Large asset managers are already having to comply with similar requirements in Europe (regardless of where their portfolio investments are located). Regardless, as long as the disclosures are fairly designed for the protection of investors, a factual assessment of the kind commonly delegated by Congress to regulatory agencies, they would fall within the clear limiting principle of that law. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team. [1]This statement represents the views of the Acting Director of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC or Commission). 3:09-CV-01740 VLB, 2013 WL 1188050 (D. Conn. Mar. John Coates has conceded the Australian Olympic Committee's (AOC) brand has been damaged by a bitter presidency campaign in which he emerged victorious. L. Sch. John C. Coates is the Acting Director of the SECs Division of Corporation Finance. The financial disclosure that John Coates filed also offered a rare public peek into the costs of corporate compliance monitors. Reflected in the PSLRAs clear exclusion of initial public offerings from its safe harbor is a sensible difference in how liability rules created by Congress differentiate between offering contexts. As a result: As a result of these limits, climate advocates appropriately view the rule as incomplete, and from the point of view of environmental protection, the rule could not reasonably be viewed as complete or effective at addressing climate change. 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. Three of those exclusions are of note: those made in connection with an offering of securities by a blank check company, those made by a penny stock issuer, and those made in connection with an initial public offering. Without such confidence, Congress astutely observed: Easy liquidity of the resources in which wealth is invested is a danger rather than a prop to the stability of [the market] system.
Body Found In Bray Harbour, Articles J