ESG disclosure and the issuer
Disclosure around ESG has two basic purposes: to disclose material ESG-related risks and to highlight ESG-focused initiatives for the issuer or the financed projects. With respect to material risk disclosures, the consideration is whether the disclosure of the omitted information would have been viewed by a reasonable investor as having significantly altered the “total mix” of the information made available. When making this assessment through the ESG lens, the issuer needs to assess whether there is an ESG-Related Disclosure that significantly impacts its financial health, the project(s), or the financing(s). An issuer may also opt to put in voluntary ESG disclosures to elevate investor interest. When making any disclosure, including ESG-Related Disclosures, the issuer should consider whether there are any material omissions or misstatements related to the information provided and consult legal, bond and disclosure counsel.
Additionally, as market benefits for ESG-Labeled Bonds increase, discussions around ESG Labels will become more prevalent.
Responding to the MSRB ESG RFI is a great opportunity to provide important market input prior to the development of any additional regulation or guidance around this increasingly important issue. You can respond to the RFI here.