A sales communication pertaining to an investment fund should accurately reflect the extent to which the fund is focused on ESG, as well as the particular aspect(s) of ESG that the fund is focused on. In staff’s view, a fund should not include statements in its sales communications that indicate that it is focused on ESG unless the fund is an ESG Objective Fund.
In general, staff’s view is that a sales communication that does not accurately reflect the extent and nature of a fund’s focus on ESG, or lack thereof, would both be misleading and conflict with the information in the fund’s regulatory offering documents.
Examples of such sales communications may include those that do any of the following:
- suggest that a fund is focused on ESG when it is not
- suggest that a fund is focused on all three components of ESG when it is only focused on one component, such as governance
- suggest that ESG factors are considered as part of the investment process of, or that ESG strategies are used by, all or most of an IFM’s fund line-up when ESG factors are only considered, or ESG strategies are only used, by a smaller subset of the IFM’s funds
- misrepresent the extent and nature of the use of ESG strategies by the fund (or by all or most of an IFM’s fund line-up), including:
- in the case of an ESG Limited Consideration Fund, suggesting that the consideration of ESG factors plays a more significant role in the investment process than it actually does or being unclear about the limited role that the consideration of ESG factors p lays in the investment process
- in the case of a fund where the use of an ESG strategy is discretionary, stating that the fund uses the ESG strategy without clearly disclosing that the use of the strategy is discretionary
- suggesting that ESG factors are considered as part of the investment process as a whole where ESG factors are only considered in a specific part of the investment process (e.g. suggesting that ESG factors are considered as part of the investment selection process when they are only considered as part of the IFM’s stewardship activities)
- failing to:
- disclose that there is a maximum limit to the fund’s use of those strategies;
- actually use the advertised ESG strategies, including using different types of ESG strategies altogether; or
- prominently disclose material aspects of the ESG strategies.