SEC's proposed ESG rules are here; U.S. recession not on the horizon

Voice of the CFO | April 2022

KPMG convened a cross-industry group of chief financial officers (CFOs) to discuss their most critical issues as we approach the midway point of 2022. This call focused on the U.S. Securities and Exchange Commission’s (SEC) new proposed reporting requirements related to environment, social, and governance (ESG) as well as the state of the overall economy with an eye to a potential U.S. and global recession. From KPMG, Carl Carande, U.S. vice chair and global head of Advisory led the discussion. Maura Hodge, Audit partner; Erin McCloskey, Audit partner; and Ken Kim, senior economist, provided subject matter insights.

Key takeaways

CFOs across industries expressed similar key concerns on how to respond to the SEC’s onerous and often unclear proposed ESG rules, worries about inflation, the overall state of the economy and, more specifically, the likelihood of a recession.
While the recently proposed rules aim for consistency and attempt to codify existing guidance and current practice, they create many new and potentially burdensome requirements regarding emissions and cyber security policies, controls and reporting.
Additional clarity is needed on how to apply many of the SEC’s proposed ESG requirements. For example, guidance is needed on how companies would apply the new rules regarding aggregation and disclosure of individually immaterial cyber security incidents.
Many participants expressed a combination of confusion and skepticism regarding the proposed rules and have adopted a wait-and-see approach before taking action.
Despite rising inflation, continuing supply chain issues and troubling global events, the U.S. economy remains firm, and the potential for an imminent recession appears to be overstated.

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