The SEC Division of Investment Management staff issued a statement providing expectations for ESG-focused fund disclosures in registration statements, shareholder reports, and marketing materials.
The statement emphasizes that funds using ESG terminology in their names or marketing must ensure that their investment strategies and portfolio holdings are consistent with the ESG approach described to investors.
Staff expectations include specific disclosure of ESG screening criteria, the weight given to ESG factors relative to financial factors in investment decisions, and the sources and methodologies used for ESG data and ratings.
The statement addresses proxy voting practices, noting that funds claiming to incorporate ESG considerations should disclose how ESG factors influence their proxy voting guidelines and decisions.
Funds are reminded that making materially misleading statements about ESG practices may violate the antifraud provisions of the federal securities laws and could result in enforcement action.