The SEC Plans to Finalize ESG-Related Rules in 2023

The U.S. Securities and Exchange Commission (SEC) recently released its 2023 Regulatory Agenda, which outlines another ambitious year of environmental, social, and governance (ESG) rulemaking under Chair Gensler. According to the agenda, the SEC plans to finalize 29 rules throughout the year and propose an additional 23 rules or amendments.

While these rules will impact many aspects of the U.S.’s financial markets and its investors, three rules that are expected to be finalized will significantly change how firms interact with ESG issues. This includes finalization of rules that would require publicly traded companies to disclose various types of greenhouse gas emissions, restrict which funds can include ESG-related terms in the fund’s name, and require investment advisers and investment companies to provide greater transparency and disclosures about how ESG factors are considered in investment strategies.

The expected timeline for the finalization of the SEC’s ESG-related rules is as follows:

• April 2023 - Climate Change Disclosure
• October 2023 - Investment Company Names
• October 2023 - Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices

While the final text of the rules may vary from the proposed rule language due to feedback the SEC received during its comment period or from the expected litigation around several of the rules, it is safe to say that the SEC will expect more transparency and information from firms that make ESG-related claims to investors.

How we help

Our ESG Advisory Practice will continue to monitor the finalization of the SEC’s proposed rules across the year, providing additional guidance and resources to help firms prepared to meet these heightened expectations. We can also help the affected advisers prepare for these proposed amendments with:

• Policy and procedure development and review
• Disclosure verification
• Marketing disclosures and review
• Portfolio performance assessment

To discuss the SEC’s proposed rules, or to hear our team’s perspective on this and other ESG issues, please contact our ESG Advisory Practice.

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