The Board of Governors of the Investment Company Institute (ICI) has unanimously approved a statement encouraging U.S. public companies to provide enhanced reporting on environmental, social and governance (ESG) factors.

The ICI board’s action signals a continued focus on ESG at the fund trade group, whose members manage more than $34 trillion in assets globally.

Fund managers increasingly expect companies to provide disclosure that is “accurate, comparable and timely” in accord with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and the standards of the Sustainability Accounting Standards Board (SASB), the ICI said in a statement.

“Fund managers require access to financially material ESG-related information from corporate issuers that is accurate, comparable, and timely,” ICI Chairman and J.P. Morgan Asset Management CEO George C. W. Gatch said in a press release.

A recent report by KPMG that studied climate risk reporting found that while 40% of 5,200 companies reviewed worldwide acknowledge the financial risks of climate change in their reporting, only 20% report those risks in line with TCFD recommendations.

“There is an emerging global consensus that companies should follow TCFD recommendations and SASB standards, and ICI members support this approach to help ensure fund managers can get useful information to make important decisions consistent with the investment objectives of funds and the needs of their shareholders,” Gatch said.

The ICI’s decision contrasts with recent Securities and Exchange Commission decisions to limit the amount of ESG information that public companies must disclose.

Under current SEC regulations and guidance, companies are only required to disclose ESG issues if they are "material” and would alter the "total mix" of information available to investors. Critics say that has led to disparate ESG disclosures that may frustrate comparison among issuers and confound investors, critics says.

Among those critics are SEC commissioners Allison Herren Less and Caroline Crenshaw, who will be able to form a three-member majority when President-elect Joe Biden appoints a new SEC chairman.

Lee says the SEC should be demanding more ESG disclosures from the entities it regulates and recently called the SEC’s failure to require the disclosure of ESG-related risks like diversity and climate change “an unsustainable silence.”

She dissented from approving a new shareholder rule (SEC Rule 14a-8) that she said makes it more difficult for investors to raise ESG-related issues with the management of companies in which they own stock.

“These changes will be most keenly felt in connection with ESG issues, which comprise the main subject matter of shareholder proposals, at a time when such proposals are garnering increasing levels of support,” she wrote in her dissent.

TCFD recommendations are guiding principles for companies with regard to their disclosures of:
governance around climate-related risks and opportunities;
• actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy, and financial planning, where such information is material;
• means by which the company identifies, assesses, and manages climate-related risks and how these are integrated into an overall risk management framework; and
• metrics and targets used to assess and manage relevant climate-related risk and opportunities, where such information is material.