SEC Proposes to Enhance Disclosures of ESG Investment Practices
The U.S. Securities and Exchange Commission (SEC) proposed amendments to rules and disclosure forms to promote consistent, comparable, and reliable information for investors concerning funds’ and advisers’ incorporation of environmental, social, and governance (ESG) factors. The comment period for the proposed amendments will end 60 days after publication in the Federal Register.
The proposed rule and form amendments are designed to provide consistent standards for ESG disclosures, allowing investors to make more informed decisions as they compare various ESG investments. The proposal’s framework for ESG-related strategy disclosure is designed to allow investors to determine whether a fund’s or adviser’s ESG marketing statements translate into concrete and specific measures taken to address ESG goals and portfolio allocation. These proposed amendments would apply to certain registered investment advisers, advisers exempt from registration, registered investment companies, and business development companies. The proposed amendments seek to categorize ESG funds broadly into three types—Integration funds, ESG-focused funds and Impact funds. The proposed rules and form amendments would enhance disclosure by:
- requiring additional specific disclosure requirements regarding ESG strategies, including information about the impacts they seek to achieve and key metrics to assess their progress on achieving those impacts, in fund prospectuses, annual reports, and adviser brochures
- requiring ESG-focused funds to provide additional information about their proxy voting or ESG engagements
- implementing a layered, tabular disclosure approach for ESG funds to allow investors to compare ESG funds at a glance
- requiring certain environmentally focused funds to disclose additional information regarding the greenhouse gas emissions, including carbon footprint and the weighted average carbon intensity associated with their portfolio investments
In addition to these ESG disclosures, SEC also proposed amendments to reporting forms N-CEN and ADV Part 1A, which are XML-structured forms on which funds and advisers, respectively, report census-type data. These updated reporting forms would provide the SEC, investors, and other market participants with structured data that can be used to understand industry trends in the market for ESG investment products and services.
Related Links
- Press Release
- Proposed Rule on ESG Disclosures
- Fact Sheet on ESG Disclosures Proposal
- Statement on ESG Disclosures Proposal
Keywords: Americas, US, Banking, ESG, Climate Change Risk, Disclosures, Reporting, Carbon Footprint, N-CEN, ADV Part 1A, Sustainable Finance, SEC, Subheadline
Featured Experts
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Hasan Cerhozi
Hasan leads Moody’s Analytics ESG methodology development. He is expert on carbon transition, nature related risks and is a guest lecturer at ESSEC Business school on sustainable finance.
Previous Article
NCUA Issues Letter to Credit Unions on Use of DLT TechnologyRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.