ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) AND SUSTAINABLE INVESTING
On 13 April 2022, the Cayman Islands Monetary Authority (CIMA) issued a circular to acknowledge that similar to other regulators in various jurisdictions around the globe, recognizes that Environmental, Social and Governance (“ESG”) considerations, or sustainable investing, is increasingly becoming the fastest growing investment strategy within the financial services sector. Investment funds in particular, regardless of their size and/or complexity, are pursing this investment strategy.
There is an urgent need for robust investor education related to the evolving risks and issues associated with ESG-type investments, inter alia, collecting and managing data required for risk modelling and establishing consistent transparency and disclosure requirements.
At a minimum, those charged with governance of regulated funds should have clear roles and responsibilities in managing and mitigating the risks from climate change and other ESG-related risks in line with the fund’s set investment objectives and should start establishing reliable approaches for identifying, measuring, monitoring, and managing material ESG-related risks. Additionally, funds are required to ensure clear and ongoing disclosures in the context of their reporting requirements.
As part of its supervisory mandate, CIMA will continue to undertake reviews, including assessing the available information, such as best practices undertaken in other key financial jurisdictions, with the aim of developing a suitable regulatory and supervisory approach for climate related risks and other ESG-related risks.