The Municipal Securities Rulemaking Board is requesting information from issuers, investors, dealers and municipal advisors on environmental social and governance practices in the municipal securities market.
The MSRB characterized the RFI as a fact-finding mission in an attempt to better understand and enhance issuer protection, investor protection, fairness and efficiency of the municipal securities market in relation to the disclosure of ESG related information and labeling and marketing of municipal securities with ESG designations.
“This is a fact finding mission for the MSRB,” said Mark Kim, chief executive officer of the MSRB. “Given the absence of uniform standards surrounding ESG disclosures and bond labeling, we want to hear from stakeholders on their perspectives for how to enhance issuer and investor protections related to these matters.”
The RFI is out for a period of 90 days, with comments due by March 8, 2022. It features specific questions that are targeted to municipal issuers, investors in municipal securities, dealers, municipal advisors, as well as a general section for all municipal market participants.
Many market participants like to say that municipal securities are the original ESG investment, as many ESG-related projects including clean energy, water, affordable housing and economic development are financed by muni bonds. But the rapid increase in ESG activity in recent years has the board focused on gathering information and evolving ESG practices for the municipal securities market.
“The municipal market is in many ways the original ESG market, having financed trillions of dollars in environmentally and socially impactful projects over the past two centuries,” MSRB Chair Patrick Brett said. “This defining characteristic of municipals attracts both talent and capital to our market, benefitting issuers, investors and the general public."
“As the pace of ESG-related projects and capital formation accelerates across the global capital markets, it raises important questions for the municipal market, and those are the focus of today’s request for information," Brett added.
The MSRB’s RFI is also a direct response to what the board has been hearing from muni market participants engaged in ESG.
“We are hearing directly from investors that this information is important and that it's material to their investment decisions,” Kim said.” [We are hearing] that there's a lack of data available in the marketplace, that there are no uniform standards of reporting ESG information and practices that exist in the marketplace and that it's a real gap in our market.”
Securities and Exchange Commission Chairman Gary Gensler has made ESG a high priority during his first year leading the Commission, but any disclosure rules issued by the SEC will only really be required for public companies. The MSRB hopes to fill some of that gap.
“Personally, I view the MSRB's request for information as complementary to the SEC's efforts on ESG,” Kim said.
The MSRB released a new feature on its EMMA platform that indicates when an upcoming municipal security new issue is either self-designated or certified as meeting ESG criteria. The board doesn’t plan to add any new features to its existing platforms until the 90-day information period closes, but any related updates will likely be featured on its EMMA Labs platform, the MSRB's new “innovation hub.”
