CSA updates ESG disclosure guidance

CSA releases new ESG guidance for funds, enhancing clarity and investor decision-making

CSA updates ESG disclosure guidance

The Canadian Securities Administrators (CSA) have released updated guidance for investment funds on ESG related disclosure practices.

This updated guidance follows the initial guidance issued in January 2022, aiming to address additional matters not covered previously and to reflect new developments and challenges that have emerged.

The guidance specifies different levels of disclosure expectations for funds, particularly distinguishing between those whose investment objectives explicitly mention ESG factors and those that incorporate ESG strategies without specific reference in their objectives.

The CSA's intention is to set clear expectations for disclosure depending on how ESG factors are integrated into the investment process of a fund.

Based on the existing regulatory framework, this guidance touches upon various aspects of fund disclosure, including investment objectives, fund names, investment strategies, risks, ongoing disclosure requirements, and sales communications.

It is designed to cater to different types of investment funds, whether they market themselves as ESG-focused or include ESG considerations as part of their investment strategy.

Stan Magidson, CSA chair and CEO of the Alberta Securities Commission highlighted the importance of this updated guidance in the context of growing interest in ESG investing and the risks of 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.”

He also mentioned that the CSA plans to keep a close watch on the evolving landscape of ESG-related funds.

Furthermore, CSA Staff Notice 81-334 ESG-Related Investment Fund Disclosure (Revised) summarizes findings from the review of prospectuses, sales communications, and continuous disclosures conducted by CSA staff focused on ESG since the January 2022 publication.