Regulatory Update: SEC Risk Alert – Environmental, Social, and Governance (“ESG”) Investing

The SEC Division of Examinations has issues a Risk Alert – SEC Risk Alert – Environmental, Social, and Governance (“ESG”) Investing:

“The Risk Alert provides observations of deficiencies and internal control weaknesses from examinations of investment advisers and funds regarding ESG investing. It also provides observations of effective practices from such examinations. The Risk Alert is intended to highlight risk areas and assist firms in developing and enhancing their compliance practices. In addition, the staff seeks to provide transparency regarding the Division’s focus areas during examinations on this topic observed that firms approach ESG investing in various ways. In making investment decisions, some advisers and funds consider ESG factors alongside many other factors, such as macroeconomic trends or company-specific factors like a price-to-earnings ratio, to seek to enhance performance and manage investment risks. Others focus on ESG practices because they believe investments with favorable ESG profiles may provide higher returns or result in better ESG-related outcomes.”

View it here:  https://www.sec.gov/files/esg-risk-alert.pdf