In order to provide investors with meaningful disclosure about the ESG-related outcomes of a fund, staff encourage ESG Objective Funds to disclose, as part of the summary of the results of the fund’s operations in the MRFP, the ESG-related aspects of those operations, including the fund’s progress or status with regard to meeting its ESG-related investment objectives. For example, in the case of a fund whose investment objectives state that the fund will invest in companies that contribute to the fight against climate change, staff are of the view that investors would benefit from continuous disclosure that explains which companies the fund has invested in during the relevant period and how they have contributed to the fight against climate change.
Staff are of the view that all ESG Objective Funds, not just impact funds, funds with a measurable ESG-related outcome, or funds that use certain ESG-related metrics or key performance indicators, should be able to report on whether they’re achieving their ESG-related investment objectives. An ESG Objective Fund that uses any ESG strategies as part of its investment selection process in order to meet its ESG-related investment objectives, including a best-in-class strategy or negative screening strategy, can report on whether its portfolio composition is meeting its ESG-related investment objectives and whether the ESG strategies have been successfully applied during the time period covered by the MRFP.
As part of the summary of the results of the fund’s operations in the MRFP, staff encourage both ESG Objective Funds and ESG Strategy Funds to disclose any key quantitative metrics used by the IFM to assess whether the fund has satisfied any ESG considerations included in its investment objectives and/or investment strategies.
Reporting for funds that generate a measurable ESG outcome: Staff encourage ESG Objective Funds that intend to generate a measurable ESG outcome to report in their MRFPs on whether the fund is achieving that outcome. For example, where a fund’s investment objectives refer to the reduction of carbon emissions, staff are of the view that investors would benefit from disclosure in the fund’s MRFP that includes the quantitative key performance indicators for carbon emissions.
Reporting outside of the MRFP: In addition to the required disclosure in the MRFP, staff encourage ESG Objective Funds to provide investors with additional periodic information on how they are meeting their ESG-related investment objectives. We remind IFMs that websites and such non-regulatory documents are considered to be sales communications under NI 81-102, which is discussed further below under “Definition of sales communication”.
Assessment, measurement and monitoring: In order to be able to provide useful disclosure about the fund’s progress or status with regard to meeting its ESG-related investment objectives, staff encourage IFMs to regularly assess, measure and monitor the
ESG performance of the ESG-Related Funds that they manage.
Unless otherwise noted, the above guidance relating to continuous disclosure applies to all ESG-Related Funds. The following guidance applies specifically to funds that use certain types of ESG strategies.