The Canadian Securities Administrators (CSA) released an updated guidance notice for investment funds on environmental, social, and governance-related disclosure practices (ESG).
The update follows the initial guidance published in January 2022, aiming to address new developments and emerging issues without altering the original guidance's core principles.
The updated notice specifically expands on disclosure expectations for funds that, while not explicitly mentioning ESG factors in their investment objectives, incorporate ESG strategies into their investment process. It delineates varying levels of disclosure based on the degree to which ESG considerations are integrated into a fund's investment strategies.
Built upon the foundation of existing regulatory requirements, the guidance outlines detailed expectations across several areas of disclosure. These include articulating investment objectives, the appropriateness of fund names, investment strategies, risk disclosures, continuous disclosure obligations, and guidelines for sales communications. Furthermore, it clarifies how investment funds that market themselves with an ESG focus or those considering ESG factors within their investment processes should approach disclosure.
Stan Magidson, CSA Chair and the Chair and CEO of the Alberta Securities Commission, emphasized the significance of the updated guidance in light of the sustained public interest in ESG investing and the risks associated with greenwashing.
Magidson stated, "Amid sustained public interest in ESG investing and the potential for greenwashing, the CSA’s updated guidance is aimed at bringing greater clarity and consistency to ESG-related fund disclosure and sales communications, which will ultimately help investors make more informed investment decisions.” Magidson also mentioned the CSA's commitment to monitoring developments in ESG-related funds on an ongoing basis.
The revised CSA Staff Notice 81-334 ESG-Related Investment Fund Disclosure also summarizes findings from ESG-focused reviews conducted by CSA staff, covering prospectuses, sales communications, and continuous disclosure since the January 2022 guidance.
The guidance in the notice is based on existing securities regulatory requirements and does not create any new legal requirements or modify existing ones. The notice includes best practices that, while not required, staff strongly encourage investment fund managers (IFMs) to adopt to help enhance ESG-related disclosure and sales communications.