CSA Staff Notice 81-334 ESG-Related Investment Fund Disclosure

The Canadian Securities Administrators Staff Notice 81-334 (January 19, 2022) is a regulatory guidance that provides direction on disclosure practices of investment funds related to environmental, social and governance (ESG) considerations, particularly funds whose investment objectives reference ESG factors and other funds that use ESG strategies, based on existing securities regulatory requirements without creating new legal requirements. The guidance establishes that funds using ESG factors as a material or essential aspect must disclose such strategies as an investment objective in their prospectuses, requires funds to provide detailed disclosure about specific ESG factors considered and how they are evaluated, and mandates that sales communications accurately reflect the extent of the fund's ESG focus to prevent "greenwashing" that may mislead investors. The notice establishes best practices for continuous disclosure including reporting on progress toward meeting ESG objectives, disclosure of proxy voting policies and shareholder engagement activities when used as ESG strategies, and specific requirements for including fund-level ESG ratings, scores or rankings in sales communications with detailed accompanying disclosure about methodology, providers and limitations. The guidance emphasizes that changes to fundamental investment objectives related to ESG require prior securityholder approval and encourages the development of common ESG-related terms and definitions throughout the industry.