What does this affect: Registered investment companies or business development companies, especially those with “ESG,” “green,” “climate” and similar terms in their names.
Why has it been introduced: According to the proposed amendment, this has been introduced to “prevent potential greenwashing in fund names by requiring a fund’s investment activity to support the investment focus its name communicates so that investors will not be deceived or misled by the fund’s name.”
What does it require: It requires funds funds with terms such as “ESG,” “green, and “climate” would be required to adopt a policy to invest at least 80% of their assets into the type of investment indicated in its name and maintain written records documenting their compliance with the 80% investment policy.
In the last set of revisions, the amendment expanded to cover funds that indicate a specific emphasis in their names (for instance, terms like "growth" or "value") in addition to funds that incorporate references to a thematic investment approach (such as mentioning the inclusion of environmental, social, or governance ("ESG") factors like "sustainable," "green," or "socially responsible").
When would these rules come into effect: These proposals were announced in May 2022 and have been officially adopted as of September 2023.
Where is reporting required: Firms would need to enhance prospectus disclosures and establish record keeping requirements. Additionally, the SEC has proposed additional
requirements for funds to report information on Form N-PORT regarding compliance with the
proposed names-related regulatory requirements.
Original text: Proposed Amendments to the Investment Company Names Rule, Final Rule Text ‘Investment Company Names’, Fact Sheet on Final Rule ‘Investment Company Names’