III. Investment Strategies Disclosure
CSA Staff Notice 81-334 ESG-Related Investment Fund Disclosure [Part G Guidance]
Part G Guidance
Section (c)

Use of ESG ratings, scores, indices or benchmarks

An ESG rating or score is an assessment of an organization or product’s relative ESG characteristics, effectiveness and performance, including its exposure to ESG risks and/or opportunities.

In staff’s view, where an ESG-Related Fund uses internal or third-party company-level ESG ratings or scores, or ESG-related indices or benchmarks, as part of its principal investment strategies or investment selection process, the fund should explain how those ratings, scores, indices or benchmarks are used.

Staff’s view is that, for funds that use ESG-related indices or benchmarks as part of their principal investment strategies or investment selection process, the fund should identify the index or benchmark used. [FN 25] For funds that use third-party, company-level ESG ratings or scores as part of their principal investment strategies or investment selection process, the fund should identify the provider of the ratings or scores.

In staff’s view, the disclosure should also include a description of the methodology used to create the company-level ESG ratings or scores, or ESG-related indices or benchmarks, including, for example, whether the methodology is based on quantitative or qualitative data and the level of subjectivity involved in the methodology.

FN 25 Staff also remind funds and their IFMs that index mutual funds are required to, as part of their fundamental investment objectives, (a) disclose the name or names of the permitted index or permitted indices on which the investments of the index mutual fund are based and (b) briefly describe the nature of that permitted index or those permitted indices, under Item 4(5) of Part B of Form 81-101F1.