Investors ask SEC to intervene on Covid disclosures

A group of investors have called on the Securities and Exchange Commission to force companies to disclose how the Covid-19 pandemic has affected their business operations.

Representatives from 98 asset owners, fund managers, public interest groups, lawyers and trade unions, have asked the SEC to consider new disclosure rules to force companies to explain how they are protecting staff and using state aid.

In the letter, the group said they believed that businesses who do not prioritise health and safety measures risk putting their customers in danger too. They cited a lack of personal protection equipment in customer-facing roles, or failing to offer paid sick leave, as examples.

They added: “Failure to adequately protect workers can undermine the functioning of supply chains and lead to declines in productivity, or, worse, the need to temporarily shut down operations.”

The decision to write to the SEC follows comments by the SEC’s chairman Jay Clayton and William Hinman, the director of the SEC’s division of Corporate Finance back in April.

At the time, the pair “urged” companies to provide “as much detail as possible” about how the pandemic will affect their future operational performance, but did not outline any additional mandatory requirements.

“Company disclosures should reflect…. where the company stands today, operationally and financially,” they wrote, adding that companies should make investors aware how they are responding to the pandemic and how they are protecting workforces and customers.

In the same statement, companies were urged to be explicit about how their operations and financial condition may change due to the coronavirus.

Despite this advice, investors say that many companies have not gone far enough in their public disclosures since then.

In the statement submitted to the SEC this week, the investor group said more action was now needed if they are to fully understand the operating position of companies in which they invest.

“Investors are being forced to rely on news reports to try to understand how the crisis is impacting companies in their portfolios,” they wrote.

“The SEC must act to require companies to provide consistent, reliable data to investors about the economic impact of the pandemic on their business, human capital management practices and supply chain risks.”

Signatories to the letter included the Local Authority Pension Fund Forum, The Forum for Sustainable and Responsible Investment, Global Witness and the Campaign for Accountability.

In April, we analysed how the pandemic was affecting corporate capital allocations and remuneration policies. The blog, based on Minerva’s proprietary data is available here.