SEC Releases Long-Awaited ESG Proposal for Investment Firms and Investment Advisors | Hogan Lovells


On May 25, the Securities and Exchange Commission (the SEC) introduced a proposal to amend certain rules and forms under the United States Investment Advisers Act of 1940 (the Advisers Act) and U.S. Act on Investment Companies of 1940 (the Companies Act) to provide what the SEC describes as greater transparency to investors about the environmental, social and governance (ESG) factors of certain products investment funds, particularly for investment funds that present themselves as having ESG-focused strategies. The SEC does not currently mandate specific ESG disclosures by funds or advisors, instead applying existing anti-fraud and marketing rules and regulations that apply to all disclosures, including ESG matters. By emphasizing the particular risks for investors in ESG-focused investment products, the SEC intends that the proposed rules provide investors with consistent, comparable and reliable information about ESG funds and strategies. In particular, the SEC has expressed concern about “greenwashing,” the idea that funds or advisers may overestimate the role that ESG factors play in their investment decisions.

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