Even with these examples, however, people do not agree on which way they cut, and they may not cut the same way at every company. In comparison to governance, the environmental and social categories tend to be much more nebulous.

The environmental category can include, for example, water usage, carbon footprint, emissions, what industry the company is in, and the quantity of packing materials the company uses. The social category can include how well a company treats its workers, what a company's diversity policy looks like, its customer privacy practices, whether there is community opposition to any of its operations, and whether the company sells guns or tobacco.

Not only is it difficult to define what should be included in ESG, but, once you do, it is difficult to figure out how to measure success or failure.

The lack of clarity around ESG definitions combined with booming interest in ESG investments has resulted in various calls for the SEC to impose uniform definitions and disclosure requirements. In March, for example, the SEC requested comments regarding whether Rule 35D-1 under the Investment Company Act of 1940 (the "Names Rule") should apply to funds that include terms such as ESG and sustainable in their name.

Then in late May, the SEC's Investor Advisory Committee recommended that the SEC mandate disclosures concerning ESG for registered issuers of securities.

One aspect of ESG disclosures the SEC would do well to shy away from is compelling certain ESG disclosures in order to encourage or discourage certain underlying ESG conduct.

Compelled ESG disclosure for the purpose of pursuing ESG goals, rather than for the purpose of ensuring accurate and complete disclosures, may infringe on First Amendment rights. That was the finding of a federal appellate court that struck down a portion of the conflict minerals provision of Dodd-Frank because it violated "the First Amendment to the extent the statute and rule required regulated entities to report to the Commission and to state on their website that any of their products have 'not been found be DRC conflict free.'"

And it may be unnecessary for the SEC to compel any particular ESG disclosures in light of already existing legal requirements. The antifraud provisions of the federal securities laws already prohibit investment advisors (and others) from making false or misleading material representations to investors on any subject, and, indeed the SEC has long taken the position that advisors have an affirmative duty to disclose all material information to their investors.

Those antifraud and disclosure requirements apply to advisor representations about ESG investments in the same way that they apply to every other type of investment.

For public companies at least, the SEC has so far declined to go beyond these basic disclosure principles and dictate which particular ESG disclosures might be material to specific companies (and thus require disclosure).

Whether the SEC will show similar restraint in requiring specific, affirmative disclosures by investment advisors remains to be seen.

In the meantime, expect to see some SEC enforcement actions in the coming months against investment advisors alleging misrepresentations around ESG topics. The SEC doesn't need any new laws to bring those cases.

Nicolas Morgan is a partner at the global defense firm Paul Hastings. He focuses his practice on complex securities litigation in state and federal courts and representations involving government investigations and white-collar crime allegations levied against individuals and businesses. He routinely represents securities issuers, company officers and directors, investment funds, analysts and brokers in connection with SEC and FINRA investigations, litigation and arbitration. He also counsels public companies, funds and broker-dealers on securities compliance and corporate governance, conducts internal investigations and assists in regulatory examinations initiated by the SEC's Division of Corporate Finance and Office of Compliance Inspections and Examinations.