Reports show lobbyists get more active on ESG as SEC works on climate rule

SEC disclosure rule proposal expected by early next year

(Roll Call) – Lobbyists have ramped up advocacy on environmental, social and governance issues nine months into the Biden administration, as companies and trade associations look to sway federal agencies on anticipated regulations dealing with climate-related risk disclosure.

Lobbyists mentioned the acronym “ESG” in third-quarter federal lobbying reports as a specific issue for 63 unique clients, according to a review of filings by CQ Roll Call. The reports, which were due Oct. 20, cover lobbying activity from July 1 through Sept. 30.

That number is nearly double from the first quarter of the year, which included the start of Biden’s presidency and Democratic control of Congress, and in line with the second quarter. There were 37 and 68 distinct mentions of ESG in lobbying disclosures during the first and second quarters, respectively.

Mention of ESG as a specific lobbying issue has been trending upward since the term was first widely reported in lobbying disclosures for the fourth quarter of 2019. There were 21 distinct reports that mentioned ESG for the final quarter of last year, 24 from the year’s third quarter, 18 from the second quarter and 14 from the first quarter.

Groups that disclosed such lobbying included the world’s largest institutional investors and financial services firms and their U.S. operations — such as BlackRock, Barclays, Credit Suisse and The Vanguard Group — as well as trade associations, insurers, energy companies and advocacy groups. 

The jump in ESG advocacy this year is particularly driven by the Biden administration’s regulatory push to have the U.S. financial regulatory system incorporate more disclosure to better inform regulators, investors and consumers on institutions and companies’ ESG activities, lobbyists say. 

More specifically, the Securities and Exchange Commission’s highly anticipated proposed rule on climate-related risk has been at the forefront of their efforts. Industry observers say the proposal will come out either by the end of the year or early in 2022, and some lobbyists expect another surge in advocacy to follow once the SEC starts working on finalizing any disclosure requirements.

“There is a lot of discussion in Washington about what should be included in those mandatory disclosures and how companies will go about complying with those new regulations,” said Chris Treanor, counsel in the public law and policy practice at Akin Gump Strauss Hauer & Feld, one of the top K Street firms. Akin Gump was a registered firm for the Financial Services Forum on banking policy issues related to ESG, according to an Oct. 19 filing on third-quarter lobbying activity.

Focus on the SEC

The SEC’s potential rule on climate disclosure is shaping up to be the most important regulation to come out in the near term, Treanor said in an interview. It is the broadest and most-watched rule that will likely have the biggest effect on other agencies’ rule-making.

“I think there is a lot of waiting right now amongst lobbyists in Washington to see what the SEC comes out with,” he said. “Once the SEC puts out its proposed rule related to climate disclosures, I think there will be a boom in lobbying both directly to the SEC and the White House, as well as working with Congress to make sure that whenever the SEC finalizes its rule, it takes into consideration that the various priorities of Congress are workable for the private sector.”

Some 46 percent of third-quarter lobbying disclosures that mentioned ESG said climate disclosure is a specific lobbying issue. This includes the SEC’s rule-making and Massachusetts Democratic Sen. Elizabeth Warren’s bill to mandate that the SEC require issuers to annually disclose direct and indirect greenhouse gas emissions, fossil fuel-related assets and other climate-related risks.

Other legislation mentioned as specific ESG lobbying issues include a bill from California Democratic Rep. Juan C. Vargas. The bill, which would require public company disclosure of ESG information, passed the House in June.

Dan Crowley, a partner at K&L Gates’ global financial services policy practice, said the focus on ESG lobbying leans less on legislative matters because the issues under that framework are primarily regulatory and are moving forward regardless of what happens on the Hill. 

“In terms of the regulatory response, the disclosures and the efforts to do scenario testing for financial institutions, that’s all happening at the regulatory level,” he said in an interview. “For that reason, it is unlikely to be derailed no matter what happens in the next election.”

Crowley was registered as a lobbyist during the third quarter for the California Public Employees’ Retirement System, which manages pensions for more than 1.6 million California public employees and retirees, according to an Oct. 19 filing.

Broadly, the rise in lobbying on ESG issues aligns with the trend within the private sector, where shareholders are demanding more disclosures on climate risk and other ESG matters from executives, and companies have followed with a patchwork of voluntary disclosures, Crowley and Treanor said. 

“Frankly, a lot of people are playing catch-up, because these issues have been emerging for two decades,” Crowley said. “The Europeans are probably three or four years ahead of us, as they often seem to be on social policy issues — or cuisine, fashion, hairstyles, whatever, and there is no exception here.”

“To a very great extent, if you want to see where regulations are going to trend here, all you need to do is take a look at what they’ve already done in Europe,” Crowley added. “Clearly, the Biden election was a catalyst for catching up more quickly, but it probably would have happened anyway.”

Companies are also seeking out lobbyists to guide them on policies that will be the most beneficial for their businesses and to ensure they satisfy shareholders’ expectations, Treanor said.

“Companies that are lobbying in Washington need to be prepared to talk about the activities that they’re doing around ESG when they’re engaging with Democratic lawmakers and regulators,” he added. “It lends itself to relying on expertise in Washington to guide boardroom decisions when it comes to ESG and making sure that what a company believes is good corporate ESG policy is consistent with what Washington thinks is good corporate ESG policy.”

By Ellen Meyers