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Remarks before the Investor Advisory Committee

Nov. 7, 2019

Thank you for having me today. I know Chairman Clayton wanted to be here this morning, and I commend his prepared remarks to you. The Committee has an ambitious agenda today. You could easily spend all day on either of these topics – ESG investing or our Concept Release on the Harmonization of Securities Offering Exemptions.[1]

I know from the dozens of meetings I’ve had since I was confirmed how much emphasis investors put on ESG issues. Investors are increasingly putting their money into companies with good policies and track records on sustainability, ethical business standards, and good governance. Many see this as a solid, common sense approach to building long-term value.[2] I hope we will hear from this morning’s panel about their views on this, as well as the role they believe the SEC should play in this area.

For example, as most of you know, we last issued guidance on climate-related disclosure in 2010.[3] A lot has changed since then in terms of what we know about the significance of climate risk from a scientific standpoint,[4] as well as what we know about the risks companies face as a result.[5] A lot has also changed in terms of the kinds of disclosure that investors need to accurately assess and price that risk, on everything from board oversight of the risk to estimates related to stranded assets. I’m glad to see this committee take up ESG investing and look forward to learning about your work.

I’m also glad to see the focus on the Concept Release. One of the issues that concerns me in this space is the lack of thorough information on Regulation D offerings. As many of you know, the Commission put out a rule proposal in 2013,[6] a planned investor protection follow-up after it eliminated the prohibition on general solicitation under Regulation D.[7]

One goal of that 2013 proposal was to enhance our visibility into this massive private market in order to have good data from which to assess the existing exemptions, as well as to determine whether and how to go about additional related rulemakings.[8] The Commission has not finalized that rule, and I’m concerned about our continued lack of visibility into this market – especially if we are considering potential changes that might pave the way for retail investor access.

Again, I appreciate very much this Committee’s focus on these important areas and look forward to the discussion. Thank you.

[1] See Concept Release on the Harmonization of Securities Offering Exemptions, Release No. 33-10649 (June 18, 2019).

[2] See, e.g., BlackRock ESG Investment Statement (Aug. 29, 2019) (“At BlackRock, we define ESG integration as the practice of incorporating material environmental, social, and governance (ESG) information into investment decisions in order to enhance risk adjusted returns. Some of our clients call this responsible investing - to us, integrating ESG information, or sustainability considerations, should be part of any robust investment process and means adapting our research and core investment processes to account for additional sources of risk and return that are explained by ESG information.”); Vanguard, Investment Stewardship Annual Report (2017) (“[O]ur position on climate risk is anchored in long-term economic value—not ideology.”).

[3] See Commission Guidance Regarding Disclosure Related to Climate Change, Release No. 33-9106 (Feb. 8, 2010).

[4] See World Meteorological Organization, United in Science: High-level synthesis report of latest climate science information convened by the Science Advisory Group of the UN Climate Action Summit 2019 (Nov. 2019) (Explaining that the “average global temperature for 2015–2019 is on track to be the warmest of any equivalent period on record,” and discussing the impact on increasing sea levels, decreasing sea ice and ice mass, increasing food insecurity, and falling gross domestic product in developing countries, among other things).

[5] See Financial Stability Board, Recommendations of the Task Force on Climate-Related Financial Disclosures (2017) (discussing climate-related risks in “two major categories: (1) risks related to the transition to a lower-carbon economy and (2) risks related to the physical impacts of climate change”).

[6] See Amendments to Regulation D, Form D, and Rule 156, Release No. 33-9416 (July 10, 2013).

[7] See Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and Rule 144A Offerings, Release No. 33-9415 (July 10, 2013).

[8] See Amendments to Regulation D, Form D, and Rule 156, Release No. 33-9416, at 1 (July 10, 2013) (“These proposed amendments are intended to enhance the Commission’s ability to evaluate the development of market practices in Rule 506 offerings and to address concerns that may arise in connection with permitting issuers to engage in general solicitation and general advertising under new paragraph (c) of Rule 506.”).

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