Defined Benefit
Defined Contribution
Insurance Assets
Nonprofit

SEC Division of Examinations Issues ESG Risk Alert

SEC Division of Examinations Issues ESG Risk Alert
clock
1 min 39 sec

The Securities and Exchange Commission’s (SEC) Division of Examinations published a Risk Alert on April 9, 2021, with observations from recent examinations of investment advisers, registered investment advisers, and private funds that offer environmental, social, and governance (ESG) products and services.

Background

The Division issued the Risk Alert to 1) communicate its observations from past examinations and 2) address the Division’s areas of focus during upcoming examinations.

It is important to note that this communication does not represent any kind of new law or regulation; the Division is sharing areas of weakness that it has found in advisers’ practices as well as best practices. The Division expresses the concern that ESG-related disclosures and marketing practices may be misleading, as the Division finds that the disclosures are not always consistent with investment implementation policies and procedures and compliance monitoring.

In conclusion, the Division “encourages market participants promoting ESG investing to clients, prospective clients, investors, and prospective investors to evaluate whether their disclosures, marketing claims, and other public statements related to ESG investing are accurate and consistent with internal firm practices. Additionally, firms should ensure that their approaches to ESG investing are implemented consistently throughout the firm where relevant and are adequately addressed in the firm’s policies and procedures and subject to appropriate oversight by compliance personnel. Lastly, firms should also consider taking steps to document and maintain records relating to important stages of the ESG investing process.”

Bottom Line

The Division is proactively issuing this alert, which serves as a warning to market participants to ensure that their disclosures and marketing materials align with their actual investment and compliance practices. The Division is also providing examples of best practices for advisers to reference. The Division observes ESG product proliferation across asset classes; this alert should be welcome news to institutional and retail investors that are trying to wade through the morass of ESG product offerings to find products that truly align with investors’ ESG objectives.

Read the full Risk Alert here.

 

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
Defined Benefit

The Technology Revolution Catches Up to Commercial Real Estate

Bernie Bazile
Bernie Bazile explains "proptech" and what institutional investors need to know about it.
Defined Benefit

Momentum Keeps Private Equity Aloft

Gary Robertson
Callan's Gary Robertson analyzes private equity activity during the quarter.
Nonprofit

The ‘Hows’ of Hiring Diverse Managers for Nonprofits

Brad Penter
When structuring a “prudent” portfolio nonprofit trustees can and should consider serving their mission by evaluating the benefits of hiring diver...
Defined Benefit

Pandemic Affects All Sectors of Real Estate and Real Assets

Munir Iman
Hotel and Retail are the most challenged sectors of private real estate, while Office faces uncertainty; Industrial remains the best performer.
Defined Benefit

Damn the Shorts and Margin Calls, Full Risk Ahead

Jim McKee
Emboldened by more injections of vaccines, central bank liquidity, and fiscal stimulus in 1Q21, investors’ risk appetites grew again.
Defined Benefit

The U.S. Economy, Now Open for Business

Jay Kloepfer
The U.S. economy may be on track for a truly eye-opening expansion, with initial projections pointing to growth rates of 9% or even higher for 2Q.
Defined Benefit

When the Passive Index Is an Active Decision

Weston Lewis
Because of differences in passive indices, investors should understand how the one they choose will affect benchmarking.
Defined Benefit

Capital Markets Assumptions and the Future

Greg Allen
CEO and Chief Research Officer Greg Allen analyzes how Callan's capital markets assumptions have compared to actual returns.
Defined Benefit

Equities Off to a Strong Start; Inflation Fears Haunt Bonds

Kristin Bradbury
U.S. equities outpaced global stocks in 1Q21. The 10-year U.S. Treasury yield hit its highest intraday yield in 15 months during the quarter.
Defined Benefit

2021—Starting Off with Gusto!

Kristin Bradbury
How the economy did in 1Q21, and the outlook ahead.