The US Securities and Exchange Commission (“SEC”) recently proposed amendments to certain rules and reporting forms under the Investment Advisers Act 1940, as amended (the “Advisors Act”), which will require registered investment advisers. and exempt reporting advisers to disclose additional information on how they address environmental, social and management (“ESG”) factors in their consultancy activities. 
Under the chairmanship of Gensler, the SEC continues to focus on greenwashing and the inconsistency of ESG-related information provided to investors. Commentators note that there is little uniformity or standardization of ESG-related information provided to investors, despite a significant increase in investor demand for ESG strategies. The SEC is concerned that investment advisers proposing ESG strategies may exaggerate their ESG practices or the extent to which their services take into account ESG factors (a practice called ‘green washing’). The proposed amendments aim to provide more consistent, comparable and reliable information to investors on ESG factors, including through:
- creation of three classifications of ESG-related strategies (described below);
- amendment of the ADV form, Part 1A, in order to collect additional data from investment advisers related to the use of ESG factors in their consulting business; and
- amendment of the ADV Form, Part 2A, to include information on the impact of ESGs on the strategies and methodologies of registered investment advisers. 
The proposed amendments create three categories of ESG-related strategies: (1) ESG integration, (2) ESG focused and (3) ESG impact:
- ESG integration strategies usually take into account one or more ESG factors, among others, non-ESG factors (such as traditional financial indicators) and that not all ESG factors considered are dispositive to a particular investment decision.
- ESG-focused strategies are those that focus on one or more ESG factors, using them as a “significant” or “core” consideration in an investment decision. An example of an ESG-focused strategy is one that uses exclusion screens for investments that do not meet certain ESG-related criteria.
- ESG impact strategies are those that aim to generate specific benefits related to ESG, such as increasing the availability of clean water or rebuilding affordable housing.
ADV Form, Part 1A
If adopted as proposed, the amendments will result in the following changes to the tick-box style announcements in the ADV form, Part 1A:
- Ask investment advisers to disclose whether they use the ESG-Integration, ESG Focured or ESG Impact approach and whether they consider ESG factors as part of one or more significant advisory strategies provided for each separately managed account (Section 5.K); and clients of private funds (section 7.B. (1) of Annex D).
- Require investment advisers to disclose in Section 5.M whether they follow any third party ESG framework in the provision of advisory services, as well as to identify the third party by name.
- Ask investment advisers to disclose in points 6 and 7 (and 6.A and 7.A of Annex D) whether they carry out other business activities as ESG providers or have related parties that are ESG suppliers.
ADV Form, Part 2A
If adopted as proposed, the amendments will lead to the following changes to the ADV form, Part 2A:
- Require investment advisers sponsoring packaging fee programs to provide ESG-related disclosures in the Packaging Fee Program brochure, including (1) a description in point 4 of which ESG factors the investment adviser considers and how the factors are included in each packaging fee program, and (2) a description in item 6 of which ESG factors are considered by the investment adviser and how they are considered, any criteria or methodology used to evaluate the portfolio managers’ applications of the relevant ESGs in their portfolio management, and an explanation of whether the investment adviser or a third party is reviewing the portfolio managers’ applications for the relevant ESGs and the nature of the review.
- Request a new section 8.D to provide a description of each ESG factor considered for each significant investment strategy or method of analysis, together with a discussion of how these factors are included in the investment adviser’s investment advice (ie whether and how the advisor uses strategies to integrate ESG, ESG focused or ESG impact).
- Require a description in Section 10.C of any material relationship or agreement between the investment adviser (or one of its managers) and an ESG consultant or other ESG service provider. In addition, if such a relationship or agreement creates a material conflict of interest, the investment adviser will be required to describe the nature of the conflict and the manner in which the investment adviser handles it.
- Require investment advisers with specific voting policies or procedures that include one or more ESG considerations, a description in section 17.A of which ESG factors this investment adviser considers and how these factors are taken into account when voting on client securities. .
These proposed amendments underline the SEC’s focus on ESG issues and underline its desire to increase disclosure requirements on these issues. 
Public comments on the proposed amendments will be accepted within 60 days of the publication of the proposed communication on the SEC website (which took place on 25 May 2022) or 30 days after the publication of the proposed communication in the Federal Register, depending on who period is longer.
Special thanks to the summer assistant John Huddleston for his help with this article.
 Extended disclosure by some investment advisers and investment companies on environmental, social and management investment practices, edition of the Advisers Act № IA-6034, edition of the Investment Companies Act № IC-34594 (25 May 2022), available at https://www.sec.gov/rules/proposed/2022/ia-6034.pdf (hereinafter referred to as “Exemption”).
 See, e.g.., Gary Gensler, Statement on the ESG disclosure proposal (May 25, 2022), https://www.sec.gov/news/statement/gensler-statement-esg-disclosures-proposal-052522.
 FACT SHEET: ESG Disclosures for Investment Advisers and Investment Companies (25 May 2022), https://www.sec.gov/files/ia-6034-fact-sheet.pdf.
 See Ryan Russell Kemper and Michelle Klopel, The SEC highlights the ESG by creating a new website and making public comments on climate change, THOMPSON COBURN LLP (April 5, 2021), https://www.thompsoncoburn.com/insights/publications/item/2021-04-05/sec-emphasises-esg-by-establishing-new-website-and-taking-public-comments-on-climate-disclosure.