The U.S. Securities and Exchange Commission (SEC) Chairman, Paul Atkins, has expressed concerns over two recent European laws concerning corporate disclosures on environmental, social, and governance (ESG) impacts.
In an address delivered at an event held by the Organization for Economic Cooperation and Development (OECD), Atkins argued that the rules could impose undue costs on American investors and customers.
Focus on free enterprise:
Atkins’s comments underscore a shift in U.S. financial regulation, moving away from prescriptive mandates and towards a focus on free enterprise.
He called on the European authorities to prioritize cutting firms’ reporting obligations rather than pursuing ends “unrelated to the economic success of companies” or their shareholders.
“I have significant concerns with the prescriptive nature of these laws and their burdens on U.S. companies, the costs of which are potentially passed on to American investors and customers,” Atkins said in his prepared remarks.
Targeting EU directives:
The SEC Chairman’s criticism was directed at two key pieces of European legislation. The first, the Corporate Sustainability Due Diligence Directive, was adopted last year and requires larger companies to verify whether their supply chains cause forced labor or environmental damage. However, the directive was reportedly watered down to gain the support of some EU members.
The second law, the EU’s corporate sustainability reporting directive, mandates companies to disclose information regarding their environmental and social impacts to investors. In February, the European Commission proposed a loosening of these standards, though Atkins indicated more work was necessary to ease the burdens on companies.
