We have expanded the list of climate policies we assess company engagement with to incorporate land-use related policy, referring to legislative or regulatory measures to enhance and protect ecosystems and land where carbon is being stored. Assessments under this category are currently underweighted in terms of their contribution to the overall company metrics. This weighting will be progressively increased over the next 6 months.
We adjusted the terminology used to describe the queries running down the left-hand side of our scoring matrix and added additional explanatory text to the info-boxes. This has no impact on the scores and methodology. It has been done following user feedback to improve clarity.
Sustainable Finance Lobbying Overview: The Investment Company Institute (ICI) is actively engaged on sustainable finance policy globally. ICI has stated some top-line support for regulated corporate climate disclosure but has expressed concern about specific disclosure policies and does not appear to support stringent regulatory intervention for the financial sector in terms of disclosure, fiduciary requirements, or standards for funds.
Top-Line Messaging on Sustainable Finance Policy: ICI has recognized the role of the financial sector in mitigating climate change, but it is unclear whether it is supporting systemic reforms. In a Joint Paper on Financing a US Transition to a Sustainable Low-Carbon Economy, ICI stated support for the financial sector’s role in delivering the goals of the Paris Agreement. ICI has called for some government regulation on sustainable finance but has also emphasized the role that market-based solutions and real-economy regulation must play in achieving climate goals and expressed concern with some regulatory efforts in the US and EU.
Position on Regulated Corporate ESG Disclosure: Aligned with the view that regulatory intervention should focus on the ‘real economy,’ ICI has supported regulated corporate ESG disclosure, calling for collaboration between countries to achieve a global consensus on a disclosure framework. In a 2020 response to a European Commission consultation on the Non-Financial Reporting Directive (NFRD), ICI stated support for improving disclosure requirements for companies, emphasizing that investors cannot meet their own disclosure requirements without sufficient data from investee companies. However, in a 2021 response to the Commission’s review of the NFRD, ICI stated some concerns around the definition of double materiality and how it would apply to climate reporting.
ICI has expressed support for the Biden Administration’s call for regulated corporate ESG disclosure and encouraged leadership on this issue in the global arena. After the SEC released its proposed climate disclosure rule in March 2022, ICI issued a press release in support of the proposal. However, in comments to the SEC in 2022, ICI did not support the rule’s proposed financial statement disclosure requirements and advocated for narrower Scope 3 disclosure requirements. ICI has expressed concerns about the SEC’s climate disclosure rulemaking in news articles and its 2022 annual report to members. ICI applauded the creation of the International Sustainability Standards Board (ISSB) in 2021 and has urged jurisdictions to align disclosure requirements with the ISSB framework, potentially watering down the ambition of the EU standard. However, in comments on the ISSB draft standards in 2022, ICI advocated for less ambitious Scope 3 disclosure requirements than proposed.
Position on Taxonomies and ESG Standards/Labels/Benchmarks: In a 2021 response to the Singapore Green Finance Industry Taskforce’s consultation on a green taxonomy, ICI suggested that a taxonomy should not be too rigorous and cautioned against an overly narrow definition of “green” activities. In a response to the European Commission’s consultation on its renewed sustainable finance strategy, ICI did not support the Commission’s suggestions for new ESG standards and labels, warning that minimum standards would impede the ability of investors to choose from diverse sustainable investing strategies.
The ICI has been actively opposed to the SEC’s proposed amendments to the Investment Company Names rule to encompass ESG-related funds. In comments on the proposal in August 2022, ICI wrote that it “strongly opposed” the expansion of the names rule. In December 2022, ICI General Counsel Susan Olson wrote an opinion piece in the Financial Times that called for the SEC to abandon the proposal and CEO Eric Pan has called for the rule to be “discarded,” writing an opinion piece in the Wall Street Journal that called the amendments “unworkable.” ICI took a more supportive stance in its comments on the SEC’s draft ESG disclosure rules for investment companies and advisers, agreeing with the need to introduce categories for ESG-related funds but recommending a narrower approach to defining these categories. ICI also supported the Japan Financial Services Agency’s proposed definitions for ESG Investment Trusts in a 2023 comment letter.
Position on Incorporating ESG Factors Into Investor Duties: ICI has generally not supported integrating ESG factors into investor duties. In 2018 feedback on the European Commission’s proposed regulation on sustainability disclosures ICI emphasized that “dictating the ESG components of fiduciary duty would not be in the best interests of investors.” In response to the European Commission’s consultation on its renewed sustainable finance strategy in 2020 ICI did not support the Commission’s suggestions on further integrating sustainability into fiduciary duty. ICI has, in multiple instances, expressed its concern with the lack of data from corporate issuers which it says complicates ESG disclosure by asset managers.
ICI supported the 2020 SEC shareholder proposal rule that raised the threshold for proxy proposals and limited shareholder engagement. ICI took a more positive position on incorporating ESG factors into investor duties when it opposed the 2020 Department of Labor rules that sought to limit ESG investing and shareholder rights. However, in comments on the 2021 rollbacks of these rules, ICI asked the Department to remove and alter references to ESG considerations in rule language, taking issue with the “prescriptive” text and putting an end to ICI’s supportive stance toward policy that permits ESG investing. In 2022 comments to the Department, ICI advised against a requirement for fiduciaries to consider climate risk in decision making or disclose how they consider climate risk in decision making. ICI outlined several objections to the SEC’s proposed ESG disclosure rule for investors, requesting disclosure requirements for "Integration Funds" be eliminated and requesting proxy voting and engagement disclosure requirements for "ESG-Focused Funds" be eliminated. In September 2022, ICI advised the SEC against adopting a proposal that sought to expand shareholder rights and permit more shareholder resolutions to be included on company proxies.
ICI has expressed concern about the emerging trend of political efforts to discourage ESG investing. In August 2022, ICI characterized the Texas Comptroller’s decision to restrict business with firms and funds due to their use of ESG factors as “harming the ability of Texas police, firefighters, teachers, and other state civil servants to save for a secure financial future.” CEO Eric Pan outlined his opposition to the “politicization” of investing in a September 2022 opinion piece, criticizing both policies to restrict ESG investing and policies to promote ESG investing.
Transparency: ICI clearly discloses its policy positions and advocacy efforts on sustainable finance. ICI clearly discloses both general and board membership.