SEC Issues ESG Risk Alert


The SEC’s Division of Examinations’ has sent out a Risk Alert on Review of ESG Investing on April 9th 2021. The Risk Alert provides observations of deficiencies and internal control weaknesses from examinations of investment advisers and funds regarding ESG investing.

Examinations of firms claiming to engage in ESG investing will focus on

Portfolio management

– To evaluate their due diligence and other processes for selecting, investing in, and monitoring investments in view of the firm’s disclosed ESG investing approaches; proxy voting decision making processes consistent with ESG disclosures and marketing materials

Performance advertising and marketing

-Review of firm’s regulatory filings; websites; reports to sponsors of global ESG frameworks, that have been communicated to clients and prospects, commitment to follow such frameworks; client presentations; responses to due diligence questionnaires, requests for proposals, and client/investor-facing documents, marketing materials

Compliance programs.

– Review of the firm’s written policies and procedures and their implementation, compliance oversight, and review of ESG investing practices and disclosures.