ESG disclosures: Certain investment advisers and investment companies

Jun 07, 2022
Asset management
Financial services Financial reporting SEC matters Audit

The SEC has proposed to enhance disclosures where environmental, social and governance (ESG) factors are considered in the investment strategies by registered investment companies, business development companies, registered investment advisers and certain unregistered advisers.

The proposed amendments include requiring:

  • For funds that consider ESG factors in their investment strategies, additional information in the form of enhanced disclosures to investors regarding their strategy. The volume of disclosure is dependent on how central ESG factors are to a fund’s strategy, following a ‘layered’ framework approach. For advisers that consider ESG factors in their significant business strategies or methods of analysis, generally similar disclosures would be required in their brochures with respect to their consideration of ESG factors.
  • For certain ESG-focused funds (i.e., where ESG factors are significant), additional information about how their strategy is affected by the ESG factors they consider, including the intended impact and key metrics to assess progress.
  • For ESG-focused funds that consider environmental factors in their investment strategies, additional information regarding greenhouse gas emissions associated with their investments (such as the carbon footprint and weighted average carbon intensity of their portfolio).

The proposal is available for comment for 60 days after it is published in the Federal Register.

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