Broad Range of Terminology and Products in the ESG Business Landscape Hampers Investors and Regulators (Part One of Two)

Early in the rise of the environmental, social and governance (ESG) sector there was a window in which it could have been easily regulated and intentionally steered. Instead, the free market has caused rapid evolutions in, among other things, fund managers’ ESG marketing efforts and disclosures. Now, regulators are struggling to outpace the industry, leading to more confusion as all the market participants try to chart a path forward. Those and other issues were addressed in a Practising Law Institute panel moderated by Perkins Coie partner Gwendolyn A. Williamson and featuring Annette Capretta, associate general counsel at Investment Company Institute; Sharanya Mitchell, head of regulatory and international legal at Cohen & Steers; and Alexandra Russo, thematic equity and sustainability specialist at Allianz Global Investors. This first article in a two-part series examines recent market conditions and ways ESG strategies’ performance during the pandemic is affecting the space, as well as issues from the lack of standardization in ESG terminology. The second article will describe challenges with tracking ESG investing outcomes; the role of third-party ESG rating agencies; the SEC’s focus on fund names and terminology; and the Biden administration’s prioritization of ESG matters. For commentary from another Perkins Coie partner, see our three-part series on electronic communications: “Current Technological Landscape and Relevant Regulatory Measures” (Jul. 13, 2021); “Useful Training Techniques and Policies and Procedures to Adopt” (Jul. 20, 2021); and “Using Third Parties for Compliance, Mitigating Social Media Risks and Fulfilling Documents Requests” (Jul. 27, 2021).

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