On April 9, 2021, the Division of Examinations of the US Securities and Exchange Commission ("Division" or "staff") issued a risk alert to highlight the staff's observations from its recent examinations of investment advisers, registered investment companies and private funds offering ESG products and services (Risk Alert).1 The Risk Alert also provides observations of effective practices.

Noting that the US Investment Company Act of 1940, the US Investment Advisers Act of 1940 (Advisers Act) and the rules under those statutes do not define "ESG" or include ESG-specific provisions, the Division made it clear that its interest in the accuracy and adequacy of disclosures provided by advisers and funds offering clients ESG investment strategies is the same as it would be for advisers and funds offering any other type of investment strategy.

ESG investing has been an examination priority in both 2020 and 2021.2 But that understates the matter. The SEC's new webpage titled "SEC Response to Climate and ESG Risks and Opportunities" says it much better:

As investor demand for climate and other environmental, social and governance (ESG) information soars, the SEC is responding with an all-agency approach.

The webpage highlights no less than six recent SEC developments related to ESG regulatory matters. This Risk Alert is one of them.

SEC Examinations Division Issues Risk Alert On ESG Products And Services


1 The Risk Alert uses the term "ESG" in the broadest sense to encompass terms such as "socially responsible investing," "sustainable," "green," "ethical," "impact," or "good governance" to the extent they describe environmental, social, and/or governance factors that may be considered when making an investment decision.

2 See https://www.sec.gov/about/offices/ocie/national-examination-program-priorities-2020.pdf and https://www.sec.gov/files/2021-exam-priorities.pdf See also our Legal Updates at https://www.mayerbrown.com/en/perspectives-events/publications/2020/04/secs-ocie-risk-alerts-examination-focus-on-compliance-with-regulation-best-interest-and-form-crs and https://www.mayerbrown.com/en/perspectives-events/publications/2021/03/secs-division-of-examinations-2021-exam-priorities-investment-advisers-and-investment-companies

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