However, staff do not view paragraph (c) as applicable to an ESG Objective Fund that has a specialized ESG focus, such as a fund focused on climate change, if the fund-level ESG rating, score or ranking that is being disclosed is specific to the specialized ESG focus of the fund, such as a rating relating to carbon emissions.
Staff note that the principles from paragraphs (c), (d), (e) and (f) would also apply to sales communications that cover more than one fund and sales communications for which different versions of the same sales communication are produced for most or all o f the IFM’s funds. An example of the latter type of sales communication is a “fund profile”, which is typically a short overview document that covers one fund. IFMs generally produce and make publicly available a fund profile document for most or all of the IFM’s funds, and each fund profile document usually uses the same format and includes the same type of content. For both type s of sales communications, staff would have concerns about cherry-picking fund-level ESG ratings, scores or rankings to present a particular fund’s ESG characteristics or performance in a positive light if the rating, score or ranking was not included in the sales communication(s) for all such applicable funds in accordance with paragraphs (c), (d), (e) and (f). For greater clarity, staff do not consider the principles from paragraphs (c), (d), (e) and (f) to be applicable to sales communications that only cover one fund and for which different versions of the same sales communication are not produced for most or all of the IFM’s funds.
In addition, staff encourage funds that wish to disclose fund-level ESG ratings, scores or rankings in their sales communications to disclose fund-level ESG ratings, scores or rankings from at least 2 different providers.
Representativeness of fund’s ESG characteristics or performance
Furthermore, for a Portfolio-Based ESG Rating, if only a certain percentage of a fund’s underlying portfolio is covered by the Portfolio-Based ESG Rating (i.e. if less than 100% of the fund’s underlying portfolio has been rated), staff’s view is that the I FM should consider whether the portion of the portfolio that has not been rated has substantially similar ESG characteristics to the rest of the portfolio and therefore, whether the Portfolio-Based ESG Rating is an accurate representation of the ESG characteristics or performance of the entire portfolio. If the portion of the portfolio that has not been rated does not have substantially similar ESG characteristics as compared to the rest of the portfolio, the Portfolio-Based ESG Rating may not be an accurate representation of the entire portfolio and therefore, the inclusion of the Portfolio-Based ESG Rating in a sales communication may be misleading.
The above guidance also applies to Portfolio-Based ESG Rankings that are based on Portfolio-Based ESG Ratings where less than 100% of the fund’s underlying portfolio has been rated.