In recent remarks to the 2022 Cato Summit on Financial Regulation, Securities and Exchange Commissioner Mark Uyeda noted the uncertainty of both costs and benefits of ESG investing. With respect to costs, Commissioner Uyeda pointed out that the significant additional burdens from proposed climate change disclosure requirements (emphasis in original, footnotes omitted):
In its March 2022 proposal, the Commission estimated that the total existing external cost burden on companies to register their offerings on Form S-1 and file their annual reports on Form 10-K was a little more than $2 billion. The Commission then estimated that the marginal increase from the proposed climate disclosures alone would nearly triple these costs to over $6.3 billion. These estimates were based on the assumption that the cost for external legal advice was $400 per hour – an amount that has remained flat since 2006. Recently, the SEC adjusted the assumed cost to $600 per hour – and even this revision may be too low. Using this $600 assumption, the total estimated external costs quadruples to $8.4 billion.
In light of these costs, Commissioner Uyeda warns:
The uncertainty of benefits associated with ESG investing, combined with the certainty of costs for companies undertaking ESG activities, should motivate all market participants – whether public companies, investors, or asset managers – to question whether the ESG trend itself is sustainable over the long term.