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SEC investment management proposals focus on ESG

Defining Issues | May 2022

Proposals target the Names Rule plus ESG disclosures by funds and investment advisers, aiming for enhanced transparency.

FRV use

The proposed rules are intended to provide consistent standards for Environmental, Social, Governance (ESG) disclosures, and to provide investors with more certainty about the nature of a fund. 


SEC Release No. IC-34593, Investment Company Names

SEC Release Nos. IA-6034, IC-34594, Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices

  • Certain funds governed by the Investment Company Act, and certain advisers governed by the Advisers Act

Relevant dates

  • The original proposal comment period ended August 16, 2022.
  • In October 2022, the SEC reopened the comment period for this proposal due to a technical error.

Key Impacts:

Names Rule proposal 

  • Modernizes the 80% investment policy requirement.
  • Clarifies the use of ESG terminology in certain fund names.
  • Includes various other non-ESG proposals – e.g. specifies when a fund may depart from its 80% investment policy for a limited time.

ESG Enhanced Disclosure Rule proposal

  • A key objective of the proposal is to establish standardized disclosures that explain how the defined ESG strategy and goals described in a fund’s reporting are deployed. The proposed amendments impact the prospectus, annual reports and regulatory reporting – including a single, consistently presented table. The proposed amendments impact the prospectus, annual reports and regulatory reporting. 
  • The proposal identifies three types of ESG funds, with the aim of scaling disclosures depending on the significance of ESG factors to a fund’s strategy.
  • An ‘integration fund’ considers one or more ESG factors in its investment decisions, but they are not determinative in selecting investments. Disclosures would cover how ESG is incorporated into the investment process.
  • For an ‘ESG-focused fund’, ESG factors are a significant or main consideration in (1) selecting investments or (2) engaging with the companies in which it invests. Detailed disclosures would be required, including a standardized overview table. 
  • An ‘impact fund’ is a type of ESG-focused fund that seeks to achieve a particular ESG impact. In addition to the disclosures for all ESG-focused funds, incremental disclosures would be required about how progress is measured.

Report contents

  • Applicability
  • Fast facts, impacts, actions 
  • Background 
  • Applicability of proposals 
  • The Names Rule proposal  
  • The ESG Enhanced Disclosure Rule proposal 
  • Transition 
  • Next steps

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Partner, Dept. of Professional Practice, Sustainability, KPMG US

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