ESG Investing: What ESG Funds Are and How to Check One
ESG investing means choosing investments using environmental, social and governance criteria. An ESG fund is a mutual fund or ETF that applies those criteria to its holdings. The SEC's investor bulletin warns that some factors "are not defined in federal securities laws, may be subjective, and may be defined in different ways by different funds or sponsors," so two ESG funds can hold very different things.
Table of Contents
What ESG Funds Are
The three letters stand for environmental, social and governance. Environmental covers a company's effect on the planet, social covers how it treats workers, customers and communities, and governance covers its leadership, pay and shareholder rights. A fund can use these in different ways: screening some companies out, tilting toward higher-scoring ones, or targeting a specific outcome. The SEC bulletin also notes that "some funds that don't have 'ESG' in the name may still incorporate elements of ESG investing into their portfolios." This is a values choice, not a return forecast, and results vary.
There Is No Standard ESG Score
The SEC says "there is no SEC 'rating' or 'score' of E, S, and G that can be applied across a broad range of companies," and that private ratings "often differ significantly from each other." The same company can score well with one provider and poorly with another. Treat a rating as one provider's opinion, and read how the fund itself picks holdings.
The SEC Fund Names Rule: Dates
The SEC adopted amendments to its fund "names rule," rule 35d-1, on September 20, 2023. The compliance dates below come from the SEC's February 23, 2026 Federal Register release.
| Requirement | Fund groups with $1 billion or more | Fund groups under $1 billion |
|---|---|---|
| Other rule 35d-1 amendments, related prospectus disclosure and reporting | June 11, 2026 | December 11, 2026 |
| Form N-PORT amendments | Fund groups with $10 billion or more | Fund groups under $10 billion |
|---|---|---|
| Extended compliance date | November 17, 2027 | May 18, 2028 |
Source: Federal Register, 91 FR 8379 (Feb. 23, 2026), retrieved Nov. 7, 2026. We found no later SEC release on the rule when we checked, but rules can change, so confirm on sec.gov.
How to Check a Fund
- Read the prospectus for the investment objective and strategy, and the shareholder report for top holdings.
- Compare the holdings with a plain index fund to see what is different (our suggestion, not the SEC's).
- Ask how much the fund focuses on ESG factors versus traditional ones, how it weights the three, and which criteria drive its picks.
- Compare fees and expenses with other options.
The questions on weighting, criteria and fees come from the SEC bulletin. For wider context see how to diversify and ETF vs index fund.
Sources & Methodology
- SEC definitions, "no rating or score," funds without ESG in the name, what to read and what to ask: SEC Office of Investor Education and Advocacy, Environmental, Social and Governance (ESG) Funds, Investor Bulletin, Feb. 26, 2021, retrieved Nov. 7, 2026.
- Names rule dates: Federal Register, 91 FR 8379, Feb. 23, 2026, retrieved Nov. 7, 2026.
This page makes no claim about ESG fund returns. We did not use vendor rating or fund-flow data. The bulletin is from 2021, so check it for updates.
FAQ
What does ESG stand for?
Environmental, social and governance.
Is there an official ESG rating?
No. The SEC says there is no SEC rating or score of E, S and G that applies across companies, and private ratings often differ significantly.
Do ESG funds beat the market?
We make no claim either way. Results vary by fund and period.
Where do I find what an ESG fund holds?
In its prospectus and shareholder report, on the fund's website or on SEC EDGAR.
General information, not financial advice.
