ESG-related disclosure for funds that consider ESG to a limited extent

Since the publication of CSA Staff Notice 81-334 ESG-Related Investment Fund Disclosure (the Staff Notice) and during the course of staff’s ESG-focused prospectus, continuous disclosure and sales communication reviews, staff have observed a significant increase in the number of investment fund managers (IFMs) that include disclosure about environmental, social and governance (ESG) factors and strategies in the prospectuses of their funds.

Staff have learned from IFMs that, for many of these funds, the consideration of ESG factors plays only a limited role in the fund’s investment process. For example, some funds only consider ESG factors as one of many inputs in their risk management process. However, the prospectuses of such funds are not always clear that the consideration of ESG factors plays only a limited role in the fund’s investment process.

As part of these reviews, staff have also observed that the websites of some IFMs indicate that the IFM considers ESG factors as part of the investment process of the funds that it manages, which include funds that only consider ESG factors to a limited extent, but these websites are not clear about the limited role that ESG factors play in the investment process for those funds.

During these reviews, staff have received questions and feedback from a number of IFMs regarding the appropriate level of ESG-related disclosure for these types of funds. Staff have engaged with many IFMs on this issue through both the review process and general dialogue.

Staff remind IFMs that, as stated in the Staff Notice, both prospectuses and sales communications should accurately reflect the extent to which a fund is focused on ESG.

To assist IFMs in preparing their disclosure and sales communications (including websites), IFMs who manage funds that consider ESG factors to a limited extent and who have questions about the disclosure of such funds are encouraged to contact staff of the Investment Funds and Structured Products Branch to discuss how the guidance in the Staff Notice applies to their funds.

Questions:

• Sean Costen, Legal Counsel, Investment Funds and Structured Products Branch
  [email protected]
• Ritu Kalra, Senior Accountant, Investment Funds and Structured Products Branch
  [email protected]
• Bryana Lee, Senior Legal Counsel, Investment Funds and Structured Products Branch
  [email protected]
• Sovener Yu, Senior Accountant, Investment Funds and Structured Products Branch
  [email protected]