IAA Supports SEC’s ESG Proposal, Recommends Improvements
August 16, 2022
IAA VP of Communications & Marketing Janay Rickwalder | 703-357-3918
August 16, 2022 (Washington, D.C.) – The Investment Adviser Association (IAA) submitted a comment letter today to the U.S. Securities and Exchange Commission (SEC) providing recommendations on its proposal to require registered investment advisers and other investment advisers to provide additional information regarding their environmental, social, and governance (ESG) investment practices.
“The IAA supports the proposal to require ESG disclosures, with recommendations to make the disclosures more meaningful,” said IAA President and CEO Karen Barr. “Investment advisers have long considered material ESG factors as an integral part of prudent investment and risk management processes and we believe that investment advisers and funds are already required to make these kinds of disclosures, whether related to ESG or otherwise,” continued Barr.
The Proposal would require an investment adviser firm to provide a detailed description of its consideration of ESG factors for each significant investment strategy or method of analysis it uses. “As fiduciaries, investment advisers have an ongoing obligation to inform their clients of any material information that could affect the advisory relationship,” said Barr.
“We strongly recommend that the Commission use a materiality standard for disclosure. Otherwise, investment advisers would be required to disclose immaterial information to investors that would not be decision-useful, could obscure material non-ESG-related disclosures, and may mislead investors by overemphasizing ESG factors relative to other more important factors.”
The letter makes the following recommendations:
- Include a materiality standard in investment advisers’ and funds’ ESG factor disclosure obligations and, to prevent greenwashing, focus on how investment advisers and funds market themselves to the public.
- Remove the proposed requirements relating to private fund investment advisers or, in the alternative, preserve the confidentiality of their proprietary information and allow them to provide aggregate, rather than private fund-specific, disclosures.
- Not require disclosure of proprietary or competitively sensitive ESG investment methods and strategies.
- To minimize duplicative disclosure, require reporting of third-party ESG frameworks at the investment-adviser level rather than at the strategy level unless the framework is being used at the strategy level.
- Provide greater flexibility for investment advisers to provide ESG proxy voting information.
The IAA looks forward to providing further feedback and working with the Commission as it considers these important issues.
The IAA’s comment letter is available here.
About the Investment Adviser Association
The Investment Adviser Association (IAA) is the leading trade association representing the interests of fiduciary investment advisers. The IAA’s member firms collectively manage more than $35 trillion in assets for a wide variety of institutional and individual investors. In addition to serving as the voice of the advisory profession on Capitol Hill and before the SEC, DOL, CFTC, and other U.S. and international regulators, the IAA provides extensive practical and educational resources to its membership. For more information, visit www.investmentadviser.org or follow us on LinkedIn, Twitter and YouTube.