Understanding the SEC’s Proposed Climate Rules: Part 1
Earlier this year, Professor Steve Cohen published a blog post detailing the potential updates that would be made to the Security and Exchange Commission’s (SEC’s) climate disclosure rule, and the ways in which Columbia’s M.S. in Sustainability Management program would adapt to the needs of this rule change by adding three new courses to the program’s elective list. These new courses — “Management of SEC Climate Disclosure Compliance,” “Understanding the SEC Rule: Disclosure Law for Non-Lawyers,” and “Climate Risk & Scenario Analysis” — are being designed to help our students understand the complexities and nuances of what these proposed rules will mean for the future of investing in a more sustainable world.
Sustainability Management (SUMA) staff and faculty have been working alongside professionals to design these courses so that they are as effective as possible. We reached out to the professors of these new courses so that they can share their own experiences as well as what they think the courses will have to offer in the wake of the proposed changes to the SEC guidelines. Over the next few weeks, we will be sharing their responses in a series of three blog posts so that you can get to know them better and get a peek at their new courses.
First, we will be hearing from Carolyn Kim Allwin about her new course, “Management of SEC Climate Disclosure Compliance.” (Stay tuned for Parts 2 and 3.)
Carolyn Kim Allwin is the head of ESG in the U.S. for Capco, a global technology and management consultancy specializing in driving digital transformation in the financial services industry. She helps companies navigate regulatory changes and implement efficient cross-border tax planning strategies.
Before Capco, Allwin served as chief sustainability officer for Recap Investing, associate counsel at GoldenTree Asset Management, and consultant at Ernst & Young. Allwin serves as a venture partner for Clearstone, which invests in impactful startups with an aim toward reducing barriers to upward mobility for low-income populations.
Her many years of professional experience within the sustainability sector will be invaluable to students in the course.
What initially motivated you to pursue environmental finance?
When I was younger, I wanted to save the world and make it a better place. I thought I would accomplish that by becoming a lawyer — I’d be positioned to give a voice to marginalized communities, make money, and then give back through philanthropy. But that was not enough for me. I realized that I needed more meaning in my life and career. I was curious how to best utilize and contribute my skills to help catalyze more capital towards impact — especially with this burgeoning space of sustainable investing.
That was over 10 years ago, and I am still thrilled every day to have the opportunity to contribute my expertise and experience in the financial services industry to the development of sustainable investing. At this point in my career, I carefully consider how each new opportunity will add to my cumulative impact on the world for our children, their children, and generations to come. I call this stage of my career my “Intergenerational Impact Creation” stage.
The opportunities I have had to teach have been incredibly fulfilling and rewarding, because I have had the chance to equip the next generation of sustainability leaders with knowledge, information, and real-world know-how on navigating a rapidly evolving ESG landscape. [Editor’s note: ‘ESG’ refers to a company’s environmental, social, and governance practices as markers of social responsibility.]
As the ESG/sustainability space evolves, what kind of challenges do you foresee in navigating this space?
The most challenging part of this landscape is that it is a nascent field that developed very ad hoc — but this is also what makes it so exciting. Sustainable investing practices in all asset classes have been maturing faster than the frameworks around them have been able to keep up. No centrifugal ESG body is driving the industry, so rules or regulations are being written as we go. As a result of that, there is no metric for success. We are reaching a point where regulatory bodies, like the SEC and the Fed, are trying to introduce metrics to increase transparency to harmonize the data and reporting. The SEC is also recently starting to crack down on ESG initiatives, issuing fines for ‘greenwashing.’ It has been interesting to see the landscape mature, and I think any organization trying to step into this should take the time to figure out what ESG means to them and how and where they authentically fit into the space. But this is a natural progression of the industry, and challenges bring opportunities.
What do you think will be the impact of these proposed SEC guidelines for climate disclosures?
From the ground up, the ripple effect could be transformational for the sustainable investing sector. To start with the most obvious, this is the first sign that the federal government intends to make reporting on sustainability mandatory. As a result, it will compel businesses to dedicate more time and resources to sustainability reporting. The reporting will then become more uniform, enhancing the reliability, comparability, and transparency of all sustainability reporting. It will help cleanse the data that investors, shareholders, executives, and all stakeholders use to make decisions. Investors will find it more beneficial and make decisions based on some environmental, social, and governance information. Motivated by this impact on their cost of capital, companies will want to continue strengthening their sustainability reporting. Ultimately, I believe sustainability reporting could achieve the same level of sophistication as financial reporting standards.
How will your course help sustainability professionals navigate these new guidelines?
Our course will equip students with the tools and knowledge they need to become solutions-oriented experts in the sector. First, as sustainability champions within their organizations, students should become in-house experts on how the existing regulatory regimes (mandatory and non-mandatory) will affect companies in the short and long term. Building upon this foundation, we will help this next generation of sustainability leaders be prepared to develop a pragmatic Year 1 implementation plan. Aligning stakeholders from the legal, financial, customer-facing, risk, and sustainability teams will be crucial in designing, managing, and implementing new processes and procedures.
These are the tenets that I have adopted in times of regulatory change and uncertainty, and as emerging sustainability leaders, the most crucial edge our students can have is to ensure maximum engagement from all parties across the first, second, and third lines of business. Ensuring all parties are engaged and invested will be critical in delivering accurate and transparent sustainability reporting.
Laura Millar is a program manager for Columbia University’s Sustainability Management and Sustainability Science programs.