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In her brief time as acting chairwoman of the Securities and Exchange Commission earlier this year, Democrat Allison Herren Lee did not play the traditional role of “caretaker.” Initiating a flurry of activity in early March, Lee effectively set the SEC’s trajectory on a new progressive agenda.
This new direction at the SEC is playing out with an initiative to mandate prescriptive environmental, social, and corporate governance disclosures in the annual filings of public companies.
As a financial regulator, the SEC requires certain economic information to be made public to investors to guide their investment decisions. The underlying principle that has long guided these disclosures is “materiality.” In 1976, the Supreme Court recognized the fundamental role investor-driven disclosures play in capital markets and defined information as material if it “significantly altered the total mix of information” to an individual’s investment decision. Materiality has thus been determined by investors and companies, with the SEC setting the