Tech giants resist adding ESG to financial reports

June 25, 2021

Leading global tech groups are resisting plans to include ESG disclosures in financial statements to US regulators.

Tech giants including Microsoft, Alphabet, Amazon, and Facebook have written to the Securities and Exchange Commission (SEC) warning of the complexity and potential legal risk of combining ESG reporting with financial filings.

Two separate letters from the tech groups and addressed to SEC chair Gary Gensler claimed to voice the companies’ strong support for ESG reporting. However, the letters also raised concerns, including the complexity of timing the collection of ESG data to coincide with the financial calendar and the risk that including ESG data based on “estimates and assumptions” in financial reports could expose them to legal liabilities.

The stance adopted by the tech giants puts them at odds with leading investment institutions that support environmental reporting being included in SEC financial filings, also known as 10-Ks.

The SEC has requested input from corporates on the issue of ESG reporting. Since the election of President Joe Biden, the SEC and other regulators are approaching ESG issues with a renewed vigour.

The first letter sent to the SEC this month was co-signed by top executives from Alphabet, Amazon, Autodesk, eBay, Facebook, Intel Corporation and Salesforce.com.

After expressing at length their support for the principle of ESG reporting, the letter stated: “Proposals should allow for new climate related disclosures to be provided outside of annual, quarterly, and other documents filed with the SEC.

“We recommend these disclosures be furnished via separate climate reporting to the SEC. Given that climate disclosures rely on estimates and assumptions that involve inherent uncertainty, it is important not to subject companies to undue liability, including from private parties.”

Microsoft sent a separate letter to the SEC soon after. Again, the group expressed its firm backing for ESG reporting, but it added: “As the Commission considers the appropriate timing and location for any climate-related disclosures, we recommend that there be flexibility for issuers to provide climate-related disclosures outside of the Form 10-K reporting cycle.

“Companies have different existing cycles for compiling climate change related information. Constraints on when data is available could present substantial challenges if additional climate-related disclosures are required as part of regular financial reporting timelines.”