With a focus on environmental, social and governance (‘‘ESG’’) concerns and the further protection of investors in the modern fund industry, the US Securities and Exchange Commission (the “SEC”) considered a proposal to update the Names Rule of funds, adopted in 2001, and the labelling for investment products under Investment Company Act of 1940 (the “Proposal”). The Proposal is part of a broader effort to ensure that fund names and investment product labels accurately reflect a fund’s investment strategy and goals, and to provide investors with more transparency and information about ESG considerations…

next steps for firms

Fund firms should ensure that their ESG funds comply with the Proposal requirements, particularly in regard to the accuracy and transparency of the fund name and investment product label; the fund’s investments should align with its stated ESG goals, and the fund name and label should accurately reflect the nature of those investments. Fund firms also need to consider the circumstances where they might be able to deviate from the changes to the Rule.