On May 25, 2022, the Securities and Exchange Commission (SEC) proposed amendments to rules and forms to promote consistent, comparable information for investors concerning funds’ and advisers’ incorporation of environmental, social and governance (ESG) factors. These changes would be applicable to registered investment advisers, advisers exempt from registration, registered investment companies and business development companies, and would allow investors to see the wide variety of strategies that ESG encompasses. This proposed amendment would also establish disclosure requirements for funds and advisers who have an ESG focus.
The proposal identifies the following three types of ESG funds and what their proposed requirements would be:
This proposal not only seeks to categorize ESG strategies, but also would require funds and advisers to provide specific disclosures in annual reports, fund prospectuses and adviser brochures as well. The information that would need to be disclosed will be based on their ESG focus as well as voting proxies related to ESG matters. In addition to the disclosures required on the aforementioned documents the proposal will also require certain ESG reporting on the following forms to complement these disclosures with reported census-type data:
All funds would need to submit the ESG related disclosures on these forms in a structured data language (XML) to make it easier for investors and others to analyze this data.
The comment period for this proposed rule amendment will remain open for 60 days after publication in the Federal Register. Full details on the proposed rule as well as a fact sheet can be found on the SEC website. We strive to keep abreast of SEC proposed rules and amendments and will ensure that our Transform™ platform is updated to align with SEC requirements once adopted.