On 13 April 2022, the Cayman Islands Monetary Authority (CIMA) issued an information circular on Environmental, Social and Governance (ESG) given the global demand for investments with strong ESG credentials.

According to Bloomberg, global ESG assets under management (AUM) are on track to exceed US$53 trillion by 2025, representing more than a third of the US$140.5 trillion in projected total AUM. Investment funds in particular, regardless of their size and complexity, are pursing this investment strategy as asset managers are under increasing pressure to integrate ESG considerations into their investment approaches.

Sustainable investing, however, is a complex and developing subject and the expectations and practices around ESG-related risks are also quickly evolving. As such, there is a growing need for regulated funds to better understand the impact of ESG-related risks in their implementation of this investment strategy. CIMA highlights the need for robust investor education, related to the evolving risks and issues associated with ESG-type investments, among other things, collecting and managing data required for risk modelling and establishing consistent transparency and disclosure requirements.

As momentum in the ESG arena is expected to continue, we anticipate the development of ESG-specific rules and regulations aimed at sustainability-related performance and periodic reporting. Although the Cayman Islands has a history of adopting global best practices early when it comes to regulation of the investment management space, it is important to note that CIMA does not regulate the asset classes or strategies of registered funds.

CIMA’s circular can be found here.