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CEOs are calling for more regulation—of ESG standards

August 12, 2021, 10:18 AM UTC

Good morning.

It’s not often business leaders call for more regulation. But at yesterday’s meeting of the Fortune CFO Collaborative, there was clear support for SEC action to require companies to disclose both sustainability and diversity metrics. Why? To provide consistency, clarity and certainty.   

Bank of America CEO Brian Moynihan, who is spending a good bit of his time on this topic these days, told the CFOs that the demand for standardized ESG metrics is coming from investors. “They want more accountability from the corporate world on what they are doing to drive progress on stakeholder capitalism, and if they weren’t going to get it, they were going to start voting with their feet.” But while every CFO knows how to measure shareholder returns, there’s been no clear agreement on how to measure stakeholder returns. As an example, Moynihan said, “in 2020, but for the pandemic, there would have been 600 (different) conventions in North America for environmental metrics.”

Moynihan chaired an effort last year with the World Economic Forum and the Big 4 accounting firms to map out a set of simplified and standardized stakeholder metrics. And now, he says, he is working with various government agencies to get those metrics adopted. “What will really change this dramatically is when someone from the official sector says: ‘This is what you will do.’”

Former SEC Commissioner Robert Jackson, now at NYU School of Law, told the CFOs to expect the SEC to jump into the act by the end of the year. “You should expect in the next six months out of this SEC a proposal to require disclosure on climate impact….and secondly, a human capital rule, which will require disclosure about workforce diversity and workforce pay.”

So stay tuned. Another big step toward stakeholder capitalism is about to take place.

More news below.

Alan Murray
@alansmurray

alan.murray@fortune.com

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AROUND THE WATER COOLER

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Chinese government crackdowns don't just affect tech magnates and democracy protests. Beijing officials also have a message for the average person: if you're going to sing a sad song, they don't want to hear it. The government has issued a new blacklist at karaoke—one of China's favorite pastimes—for songs that are judged not to be "healthy and uplifting." Fortune

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Keep up the pretense

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This edition of CEO Daily was edited by Katherine Dunn. 

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