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On April 9, 2021, the U.S. Securities and Exchange Commission (SEC) Division of Examinations released a risk alert for investment advisers and funds related to environmental, social and governance (ESG) investing. The ESG Risk Alert provides (i) observations of deficiencies and internal control weaknesses from examinations of investment advisers and funds regarding ESG investing, (ii) effective practices from such examinations, (iii) risk areas to assist firms in developing and enhancing their compliance practices, and (iv) continued staff focus areas on ESG investing during examinations.
Observations of Deficient Practices
The ESG Risk Alert identifies instances of potentially misleading statements regarding ESG investing processes and representations regarding the adherence to global ESG frameworks, including the following observations: