The Securities and Exchange Commission (SEC) has made clear in recent months that it is paying keen attention to registered firms’ policies and procedures around environmental, social, and governance (ESG).
An April 9 risk alert from the agency’s Division of Examinations provides observations from recent exams of investment advisers, registered investment companies, and private funds offering ESG products and services. Increased investor demand has led to a proliferation of ESG-related investment offerings, the SEC said, from funds that merely consider ESG factors along with other trends that might influence a portfolio’s performance, to funds that pick and sort companies based on a demonstrated commitment to a particular factor, like minimizing their environmental impact. Some have created screens that choose investment options based on ESG subsets like sustainability, climate, or faith-based investing.
