SEC Response to Climate and ESG Risks and Opportunities

  • Source: sec.gov

Treliant Takeaway:

Treliant works with clients to address Environment, Social, and Governance (ESG) issues by helping them to develop the necessary program and approach.  Here’s how we can help:

  • Our experienced team includes a former global and European CCO who brings years of ESG experience from Europe and around the globe, allowing us to work with CCOs on the development of ESG, climate, and socially responsible investing compliance and risk programs;
  • Our team of ex-regulators conduct a large number of mock reviews and annual examinations for investment advisers, private funds, and broker-dealers. These reviews focus on identifying weaknesses in compliance, risk, and infrastructure, as well as recommending practical enhancements and improvement;
  • We combine industry professionals and auditors to assist clients in developing and implementing quarterly and monthly testing programs targeted at ESG tracking and reporting issues; and
  • Our experience gained from former in-house positions allows us to support marketing professionals and portfolio managers to develop appropriate ESG, climate, and socially responsible investing compliance and risk programs.

Article Highlights:

From its earliest days, the Biden Administration has put the environment and climate issues in the forefront of its policy agenda. Consistent with that, on March 22, 2021, the Securities and Exchange Commission (SEC) launched a multi-division webpage outlining its focus on climate and ESG issues.  The website highlights several SEC initiatives including:

  • Division of Examination 2021 Examination Priorities – which included a greater focus on climate-related risks related to disclosures, conflicts and reporting.
  • Division of Endowment announcement of the establishment of an Enforcement Task Force focused on climate and ESG issues. This includes the appointment of a Deputy Director of Enforcement and 22 attorneys and support staff dedicated to leading the divisional ESG activities.
  • Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings.
  • Additional resources will be dedicated to the growing ESG funds industry by the Asset Management Division, including the publication of investor related materials.

Based on the SEC website and its supporting documents, investment management firms managing ESG or socially responsible funds and accounts may have significant scrutiny during future routine and sweep exams, including:

  • Investor Due diligence and disclosures;
  • Advertising and marketing information;
  • Portfolio management investment restrictions;
  • Performance reporting and ESG benchmark reporting;
  • Compliance and risk monitoring; and
  • Conflicts of interest

While firms not directly managing ESG and socially responsible funds may be spared the bulk of the scrutiny, investor due diligence will increasingly focus on these issues and may raise future issues for firms.

Author

Alan Halfenger

Alan Halfenger is a Managing Director in Treliant’s New York office. A former Chief Compliance Officer from the banking, securities, and investment management industry with experience in securities/brokerage, wealth management, private banking, and asset management.  Alan advises clients on compliance program development, regulatory risks related to global securities and commodities,…