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ESG reporting is a hot topic for the investment community. ESG reports provide the investment community with a corporate view of the material impact of ESG related risks to their balance sheet and the action the company is taking to mitigate the impact.
The SEC are considering adding Cybersecurity into the ESG regime and unlike climate, cyber is an easy risk to assess material balance sheet impact. Recent events in the US have demonstrated that the impact of cyber attacks on corporates has a direct impact on the US economy as demonstrated by the Fed hack in 2020, Exchange, Colonial and OBS hack in 2021. Cyber risk is assessed by banks under Basel III for regulatory capital purposes and some cyber controls are assessed under SoX, which is already in situ for publicly traded US companies. The train of precedence for has left the station for cyber material reporting and regulatory oversight.
Another consideration follows a recent statement from the chair of the SEC. Gensler says that decision is in the hands of investors, who have put $17.2 trillion into sustainably invested assets. With so much invested in sustainable funds ESG reporting is inevitable.
It provides an open door to include cyber reporting, as has already been suggested by the SEC, and request in a letter from the Cybersecurity Solarium Commission to the SEC in 2020.
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