Opening remarks at the December 1, 2020 Meeting of the Asset Management Advisory Committee

Good morning and thank you Ed [Bernard]. Thank you also to the Committee members for your continued work.

As we approach the end of the year, it is almost not worth mentioning just how much has changed for asset managers since January 1, 2020. Remote worksites, technological challenges, stomach-twisting market volatility, and analog compliance obligations in a digital economy, were just some of the hurdles asset managers encountered and successfully cleared this year. The year is nearing an end, and we hope its unique challenges also will soon be history. As attention shifts to 2021, the asset management industry needs to prepare for the next set of challenges and opportunities, and I hope this committee will help us to think about how we can keep our regulatory structure adaptable too. Whether it is crypto assets, cybersecurity, or new uses for artificial intelligence, I want our rules to provide a framework within which the industry’s ingenuity can flourish for the benefit of investors.

One thing that has not changed on the eve of 2021 is the barnacle-like presence of ESG on the short-list of topics confronting asset managers. I continue to believe that, for all its hype, ESG investing does not require us to turn our rules inside out to accommodate it any more than any other broad genre of investing, like value investing, requires us to do. Tell your investors how you plan to manage their money, and let them decide whether they want you to manage it. You, in turn, should not ask companies to spend their investors’ precious time and resources incorporating all manner of ESG minutiae into their public filings, but rather to treat ESG topics with the same materiality filter they apply to everything else. Accordingly, while I have only been able to give the ESG Subcommittee’s recommendations a cursory review, I have concerns. The concepts surrounding ESG and sustainability are simply too amorphous and open to manipulation and multiple interpretations to lead to a meaningful disclosure regime. To compare ESG disclosures to those governed and informed by GAAP principles is, in my view, mistaken. There are passionate voices in support of filling corporate securities disclosures with ESG measures, and some of those voices belong to investors. Yet we always must bear in mind that securities disclosures cannot effectively serve their vital role in helping the capital markets solve problems, including ESG issues, if they are used as a forum for social and political discussion. Nevertheless, I am always interested in what frontline industry leaders have to say on the topic and so am eager to hear your thoughts on what the ESG Subcommittee reports.

I also look forward to hearing today’s update from the Private Investment Subcommittee. Expanding the opportunities available to American investors to access the private markets has been an area of particular importance to Chairman Clayton, and I want to take a moment to thank him for his leadership. He has shepherded through to completion some much needed reforms during his time as Chairman. While there is still much to be done, Chairman Clayton has put the Commission in a good posture to continue exploring how best to open up our private markets to retail investors. The Subcommittee’s findings will, no doubt, provide important insights to aid the Commission in its ongoing efforts.

As you discuss today’s third topic, diversity and inclusion, I know you will underscore the value of treating each person as a beautifully unique individual whose worth and irreplaceable capacity to contribute to society cannot be encapsulated in sanitized statistics. In the asset management industry, as in the rest of our country’s great institutions, we must capitalize on one of America’s greatest strengths—its people—wonderfully diverse by every measure, yet working in concert with one another to build a shared, prosperous, free future for the next generation of Americans.

I hope that you find today’s discussions enjoyable and profitable. Thank you again for your work.