Dancing Away From ESG Disclosures: A Pivot Back to Materiality

On June 5, 2025, SEC Commissioner Hester Peirce delivered a major address at the International Center for Insurance Regulation Digital Insurance Forum. In a pointed critique of what has been an accelerating march of environmental, social, and governance (ESG) disclosure mandates, Peirce drew on the words of philosopher and musicologist Theodor Adorno: “Progress occurs where it ends.” With that cue, she performed a rhetorical pirouette away from the ESG movement and back toward the time-honored choreography of materiality in securities regulation.

Peirce rejected any assertion that ESG is inherently material to a business’s long-term financial value. Instead, she argued that many ESG considerations fail to meet the proper U.S. securities law standards for mandatory disclosure. Peirce criticized the “one-size-fits-all” framework that has characterized much of ESG disclosure — a regulatory stance that assumed anything branded ESG must necessarily be material to a company’s future financial performance. In Peirce’s view, that interpretation is out of step with the individualized, fact-and-circumstances analysis that materiality demands.

Moreover, Peirce warned that misguided ESG initiatives not only misdirect focus but also cause harm throughout the investment ecosystem, disrupting the delicate balance among key players:

• Capital allocation toward ESG goals masks the preferences of elite soloists — powerful political and financial actors who channel resources toward personal agendas and chosen projects rather than genuine societal needs.
• Regulators, including securities and insurance regulators and the central bank, are pulled off balance as they devote disproportionate time and resources to ESG projects, sidelining more pressing risks such as interest rate volatility.
• Companies and boards expend significant resources responding to ESG pressures from proxy advisers and ESG rating agencies, often resulting in strategic missteps that ignore core financial realities.
• Investors are misled by ESG-labeled disclosures that overshadow traditional financial indicators. The volume and ambiguity of these disclosures diminish the clear rhythm of financial reporting.
• Shareholder litigation and SEC enforcement based on ESG disclosures cost companies millions. Meanwhile, classic governance proposals — like staggered boards or poison pills — receive less attention, despite their more direct connection to financial performance.

Peirce applauded a growing trend against expansive ESG mandates. At both state and federal levels, ESG-focused rulemaking is being challenged, rescinded, or rolled back. To prevent ESG from becoming enshrined as a mandatory disclosure category, Peirce proposed codifying an express commitment to materiality within the SEC rulebook, thereby empowering the SEC to modify or eliminate mandates that lack grounding in  materiality.

This stance is consistent with Peirce’s long-standing views on ESG. For example, as early as 2022, she dissented from the SEC’s proposed ESG disclosure rules for investment advisers and investment companies, warning that the ambiguous rules “float on a cloud of smoke, false promises, and internal contradiction.” Peirce argued that the proposal failed to clearly define E, S, or G, leading to greenwashing and box-checking behaviors that undermined investor transparency and fiduciary responsibility. Her views proved prescient: On June 12, 2025, the SEC’s Division of Investment Management formally withdrew those proposed rulemaking notices.

Ultimately, Peirce characterized ESG as an ideological detour masquerading as financial insight. Rather than continuing this improvisational routine, she called for a return to a more structured performance — one guided by long-standing principles of materiality. In her view, the SEC must retake the lead to ensure that disclosures follow established steps of materiality and financial significance, and not the shifting tempo of ESG trends.

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