Defined Benefit
Defined Contribution
Insurance Assets

SEC Division of Examinations Issues ESG Risk Alert

SEC Division of Examinations Issues ESG Risk Alert
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.


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

What We Found in Our Latest COVID-19 Survey of Investment Managers

Amy Jones
The 3rd edition of our Coping with COVID-19 survey of investment managers focuses on plans for office reopenings and vaccination policies.
Defined Benefit

The Gray Areas in Green Bonds

Kristin Bradbury
A common challenge for those investing in green bonds is that there is no uniform set of requirements or standards. This makes analysis and monitoring...
Defined Benefit

The Story Behind Callan’s 2021 Capital Markets Assumptions

Capital Markets Research
An explanation of Callan's 2021-2030 Capital Markets Assumptions, how they were developed, and what changed from last year's projections.
Defined Benefit

GameStopped—Or Just Getting Started?

Jim McKee
A key issue highlighted by GameStop is the unintended consequences of zero-cost money and commission-free trading enabled by today’s highly stimulat...
Defined Benefit

Relief Bill Provides a Shot in the Arm to Corporate Pensions

William Emmett
The $1.9 trillion economic relief bill included another round of pension funding relief that reduces required, tax-deductible contributions for single...
Defined Benefit

Bloomberg Barclays Pricing Time Change and What It Means for Institutional Investors

Kyle Fekete
Asset owners, investment managers, and other parties may experience discrepancies in reporting point-in-time pricing or performance as a result.