Research Summary on ESG Policies and Regulations - United States

Research Summary on ESG Policies and Regulations

The United States

As the world's largest economy and largest financial market, U.S.' development in sustainable finance has a huge impact on the global economy. However, there are few proactive policies from the federal government of the US, and exchanges have no requirement on relative information disclosure. In recent years, the relative laws and policies are affected by the Trump administration's "withdrawal" from many international organizations. However, the capital market has manifested a trend toward sustainable finance, and "capital for good" has become the trend of the era.

1.   Federal government plays an insignificant role in driving policy

The polarizing political situation in the US has led to multiple deadlocks between legislation and policymaking. Influenced by different administrations, ESG supervising policies in the US are fluctuating between neutral and passive attitudes. Meanwhile, compared with the EU and Asian countries, US government's ESG policies and regulations are relatively weak. Most of the requirements for information disclosure are not mandatory, and there is no "comply or explain" rule as the EU does.

2.   Policies are set to solve domestic and practical problems

Most of the ESG policies and regulations released by the federal government and local governments are targeted at national conditions and sustainable development. The Government of California, for instance, pays more attention to issues such as environmental governance as California is more likely to be influenced by climate change compared to other states, owing to its geographical location and natural environment.

3.   Financial innovation pioneers in capital market

The US has a relatively open financial system, and its market's self-driving forces play a decisive role in ESG development. Influenced by the global ESG trend, based on the needs of clients, risk management and control, some investment institutions in US capital market has been spontaneously promoting sustainable finance.

4.   Emphasis on climate change

The US Securities and Exchange Commission issued "Commission's Guiding Opinions on Disclosure of Information about Climate Change", posing new requirements for environmental and climate change issues. The quantitative disclosure of relative financial expenditure and the environmental impact of investees have become the focus of ESG policies and regulations.

5.   ESG information disclosure varies greatly across industries

According to the research report "ESG Integration in America" issued by CFA Institute and PRI in 2018, the median score of public companies' information disclosure completeness in all industries, except for the finance industry, have all been improving from 2011 to 2016, indicating that US public companies' ESG information disclosure quality has been improving. Among that, the materials industry has seen fastest improvement of information disclosure, and public utilities, consumer staples, and energy industries have relatively complete information disclosure.

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