In May 2022, the U.S. Securities and Exchange Commission published a proposed rule that, if adopted as proposed, will have significant impacts for registered investment advisers, registered investment companies and business development companies.  

ESG Strategy Disclosure for Funds and Advisers

The proposal would require funds that consider ESG factors in their investment process to disclose additional information regarding their strategy.  The amount of required disclosure depends on how central ESG factors are to a fund’s strategy and follows a “layered” framework, with a concise overview in the prospectus supplemented by more detailed information in other sections of the prospectus or in other disclosure documents, all of which would be reported in a structured data language.  The proposal identifies the following three types of ESG funds:

• Integration Funds. Funds that integrate ESG factors alongside non-ESG factors in investment decisions would be required to describe how ESG factors are incorporated into their investment process.
• ESG-Focused Funds. Funds for which ESG factors are a significant or main consideration would be required to provide detailed disclosure, including a standardized ESG strategy overview table.
• Impact Funds. A subset of ESG-Focused Funds that seek to achieve a particular ESG impact would be required to disclose how it measures progress on its objective.

Advisers that consider ESG factors would be required to make generally similar disclosures in their brochures with respect to their consideration of ESG factors in the significant investment strategies or methods of analysis they pursue and report certain ESG information in their annual filings with the Commission.

Additional Disclosure Regarding Impacts and Proxy Voting or Engagements

Certain ESG-Focused Funds would be required to provide additional information about their strategies, including information about the impacts they seek to achieve and key metrics to assess their progress. The proposal would require funds that use proxy voting or engagement with issuers as a significant means of implementing their ESG strategy to provide additional information about their proxy voting or ESG engagements, as applicable.

GHG Emissions Reporting

The proposal generally would require ESG-Focused Funds that consider environmental factors in their investment strategies to disclose additional information regarding the GHG emissions associated with their investments. These funds would be required to disclose the carbon footprint and the weighted average carbon intensity of their portfolio. The requirements are designed to meet demand from investors seeking environmentally focused fund investments for consistent and comparable quantitative information regarding the GHG emissions associated with their portfolios and to allow investors to make decisions in line with their own ESG goals and expectations. Funds that disclose that they do not consider GHG emissions as part of their ESG strategy would not be required to report this information. Integration funds that consider GHG emissions would be required to disclose additional information about how the fund considers GHG emissions, including the methodology and data sources the fund may use as part of its consideration of GHG emissions.

This rule proposal was formally withdrawn by the SEC on June 12, 2025.  If the SEC wants to proceed with a rule in this area in the future, it will publish a new proposing release.

Please contact Adam Jacobs-Dean or Daniel Austin with any questions regarding this proposal.

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  Adam Jacobs-Dean

  Managing Director, Global Head of Markets, Governance and Innovation, AIMA

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  Daniel Austin

  Head of U.S. Markets Policy and Regulation