Disclosure Overload? Lessons for Risk Disclosure & ESG Reporting Reform from the Regulation S-K Concept Release

Abstract

In 2018 and 2019, the U.S. Securities and Exchange Commission (SEC) released the first new rules to emerge from a decades-long project to “modernize and simplify” the disclosure obligations that apply to publicly traded companies. Most are pragmatic fixes that should make disclosure more user-friendly for investors and cheaper for companies. Largely missing, however, are any changes to the basic rules governing how companies provide information to investors about risk, including emerging “environmental, social, and governance” (ESG) risks. In part, this is because of persistent concerns that such reforms will result in costly over-disclosure that will overload investors and obscure useful information. Using data from nearly 300 public comments submitted during the SEC’s own review of its reporting framework, this study challenges some of these key objections to ESG disclosure reform. As the first comprehensive empirical analysis of the public comment data across over 140 questions raised by the SEC, it also offers a valuable resource for current policy debates and sheds light on fundamental issues that will shape the future of risk disclosure reform.

Keywords: disclosure, securities law, ESG, Regulation S-K, sustainability, empirical

JEL Classification: K21, Q01, M14