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Why the SEC should limit its mandates on ESG disclosures

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Oct 05, 2021

Mandates by the Securities and Exchange Commission (SEC) requiring disclosures on environmental, social, and governance (ESG) compliance should be limited to matters that directly affect the cash flows of firms, according to a statement released last week by the Financial Economists Roundtable (FER), a worldwide group of 50 senior financial economists including Wharton professors.

According to the group, the SEC should refrain from measuring the broader societal impacts of ESG compliance by listed firms because those matters are outside the regulator’s areas of expertise. “While several members of FER expressed concerns over lack of progress on environmental and social issues, the group agreed the costs of the SEC mandating these kinds of disclosures could be substantial and the potential gains would likely be slight,” said Richard Herring, Wharton professor of international banking and professor of finance, who is one of the 30 signatories to the FER statement.

Review the article on Wharton's website.

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