Environmental, Social and Governance and Sustainable Investing (2022-04-13)

Summary

This is a Supervisory Information Circular issued by the Cayman Islands Monetary Authority (CIMA) on 13 April 2022, alerting regulated investment funds to the growing importance of Environmental, Social and Governance (ESG) and sustainable investing considerations. It does not create new rules or regulations but sets out CIMA's observations and expectations regarding how regulated funds should approach ESG-related risks, and signals that CIMA will continue to study the area with a view to eventually developing a formal regulatory and supervisory approach.

The circular applies to regulated investment funds generally, regardless of size or complexity, and in particular addresses those responsible for fund governance.

• Evolving area: ESG/sustainable investing is a rapidly evolving area requiring better risk data, transparency and disclosure practices.
• Governance roles: Governing bodies of funds should have clear roles and responsibilities for managing climate-related and other ESG risks in line with the fund's investment objectives.
• Risk approach: Funds should begin establishing approaches to identify, measure, monitor and manage such ESG risks.
• Disclosure: Funds are required to ensure clear and ongoing disclosure of ESG matters as part of their existing reporting requirements, though the circular does not specify new forms, deadlines or a distinct disclosure regime.

Overall, this is largely an expectation-setting and awareness-raising communication rather than a document imposing new binding compliance deadlines.

Key obligations

• Those charged with governance of regulated funds should have clear roles and responsibilities for managing and mitigating climate change and other ESG-related risks in line with the fund's investment objectives
• Regulated funds should begin establishing reliable approaches for identifying, measuring, monitoring, and managing material ESG-related risks
• Funds are required to ensure clear and ongoing disclosures regarding ESG matters as part of their existing reporting requirements

Applies to

regulated funds, investment funds