Regulatory Updates

Proposed Enhanced Disclosures About ESG Investment Practices

The Securities and Exchange Commission (SEC) has issued a proposed rule that would add reporting requirements for registered investment advisors, registered investment companies, certain advisers that are exempt from registration, and business development companies to provide additional information regarding their environmental, social, and governance (ESG) investment practices.

According to the SEC’s press release, funds focused on the consideration of environmental factors generally would be required to disclose the greenhouse gas emissions associated with their portfolio investments. Funds claiming to achieve a specific ESG impact would be required to summarize their progress on achieving those impacts. Funds that use proxy voting or other engagement with issuers as a significant means of implementing their ESG strategy would be required to disclose information regarding their voting of proxies on particular ESG-related voting matters and information concerning their ESG engagement meetings.

Additionally, the proposal would require certain ESG reporting on Forms N-CEN and ADV Part 1A, which are forms on which funds and advisers, respectively, report census-type data that inform the Commission’s regulatory, enforcement, examination, disclosure review, and policymaking roles. The comment period on the proposed rule will remain open for 60 days after publication in the Federal Register.