Matt Filosa is Senior Managing Director of Governance, William Edwards is Senior Managing Director, and Oliver Parry is Managing Director at Teneo. This post is based on a Teneo memorandum by Mr. Filosa, Mr. Edwards, Mr. Parry, Martha Carter, and Harvey Pitt.
On May 25th, the SEC proposed two rules that seek to provide the market with greater clarity on how funds incorporate ESG factors into their investment activities. While the SEC’s prosed rules are directed at investment companies and mutual funds, other companies are likely to be impacted as well. The proposed rules were also released at a time where the debate around the merits of ESG has greatly intensified.
To help companies make sense of all the recent ESG activity, we have provided our insights on:
- The recently intensified ESG debate and the heightened focus on “greenwashing;”
- The current state of “ESG funds;”
- The proposed SEC rules on fund names and ESG fund disclosure;
- How the proposed rules could potentially impact
ESG—What is it Good For? The ESG Debate Intensifies
The amount of public debate regarding the merits of ESG has been quite remarkable in recent weeks. Tesla CEO Elon Musk tweeted that ESG is “a scam.” Former Vice President Mike Pence penned a Wall Street Journal op-ed calling ESG “a craze.” These grave concerns about ESG seem to focus on companies weighing in on political issues such as abortion or LGBTQ rights, the opacity and inconsistency of 3rd party ESG ratings and companies being forced by large investors to tackle societal issues such as climate change and employee diversity. Perhaps surprisingly, a few individuals at asset management firms have also expressed concerns about ESG investing, further evidence that the investor community is not monolithic in its ESG beliefs.