SEC’s Proposed Standards for ESG Funds Meet Investors’ Need for Clarity

(Washington, D.C. – August 17, 2022) Environmental Defense Fund filed letters yesterday in support of two Securities and Exchange Commission (SEC) proposals that would bring greater transparency to environmental, social, and governance (ESG) investing.  

“The SEC’s proposed standards will help meet investor interest in fuller understanding of available ESG offerings,” said Stephanie Jones, Attorney at EDF. “The SEC is properly exercising its longstanding authority to protect investors from misleading marketing of investment products.” 

As investor demand for ESG options has grown, so has investor interest in understanding with greater precision the ESG characteristics of products and services offered by funds and advisors. The SEC has proposed standards that would require funds and advisers that use ESG-related fund names and strategies to clarify their claims, which would better equip all investors to determine which funds align with their objectives.  

The SEC’s first proposal would bring ESG-related terms (like “sustainable” or “green”) within the scope of the Names Rule, which requires funds to ensure that at least 80% of their assets align with the investment characteristics suggested by the fund name. The SEC’s second proposal would require funds and advisers that claim to use ESG strategies to provide more information on how they incorporate ESG factors into decision-making.  

You can read EDF’s comments on the Names Rule proposal here and on the ESG disclosures proposal here.