SEC Withdraws Proposed Rule on ESG Disclosures for Investment Advisers and Investment Companies

On June 12, 2025, the Securities and Exchange Commission (SEC or the Commission) issued a notice that it was withdrawing several proposed rulemakings initiated under the prior administration. Among these was the Commission’s 2022 proposal titled “Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices.” This proposal would have required registered investment advisers, certain exempt advisers, registered investment companies, and business development companies to provide additional information on the role of ESG factors in their investment decisions.

Implications for Asset Managers

In many ways, the withdrawal of this proposal is unsurprising. It aligns with the current SEC’s general approach to back away from more prescriptive disclosure obligations across the board. Particularly in the registered fund context, the 2022 proposal included several detailed information obligations (e.g., for all “ESG-focused funds” considering environmental factors to disclose certain greenhouse gas (GHG) metrics, regardless of whether the focus is climate or other environmental matters).

However, the broader question is what this means for the Commission’s approach to ESG matters and thematic investing more generally. The withdrawal of the 2022 proposal does not preclude consideration of ESG factors, nor does it exempt asset managers from scrutiny of their ultimate approach to use (or non-use) of such factors. Asset managers still must work to harmonize their investment strategy with their marketing and underlying fund documentation.

As we have previously written, the Commission has brought several enforcement actions in the past year against investment advisers for alleged misstatements or compliance failures regarding thematic investment strategies, including relating to ESG. More recently, Commissioner Mark Uyeda highlighted a study on greenwashing in his remarks at the 2025 Conference on Financial Market Regulation — specifically highlighting findings on the role of comment letters from the SEC.

Therefore, asset managers should not assume that the withdrawal of the 2022 proposal will spell the end of the Commission’s attention to ESG-related matters. While it signals a pivot, there are still multiple avenues for ESG to attract attention under the Commission’s “back to basics” approach. Questions of fiduciary duty, appropriate policies and procedures, and appropriate disclosure are all areas in which asset managers have needed to grapple with the challenges posed by incorporation of ESG considerations. And in the context of the current Commission, some of that spotlight may possibly fall on alleged under-disclosure of the way ESG or other more thematic considerations factor into an asset manager’s investment strategies. This analysis is also particularly relevant for asset managers that are required to make ESG disclosures under other regimes, such as under the EU Sustainable Finance Disclosure Regulation, which may in some cases result in differing levels of ESG disclosure to US and non-US investors.

Strategies for Asset Managers Moving Forward

Many of the strategies for dealing with this remain the same, and asset managers should consider whether to take a page out of the Commission’s own playbook — taking the opportunity for a review of these basic aspects of their own programs, ESG-related or otherwise. This may show up in a few forms, such as:

• analyzing investment vehicle documentation and other market materials for overall alignment and transparency on any limitations, exceptions, or other key considerations (including parity of ESG disclosure across jurisdictions);
• assessing how such materials are reflected in the underlying policies and procedures that guide investment decision-making; and
• confirming the extent to which such governance processes and controls are implemented in practice and potential revisions or guardrails that may need to be reflected.

Such clarity and consistency are fundamental expectations for asset managers. This holds true across topics and can serve as a navigation aid across times and SEC priorities.