ESG Marketing in the SEC's Crosshairs


Alyssa Briggs and Dan Mistler

Publish Date


Compliance Alert

  • ESG
  • Investment Adviser

The U.S. Securities and Exchange Commission’s (SEC’s) Climate and ESG Task Force recently issued subpoenas to several asset managers requesting marketing materials related to environmental, social, and governance (ESG). The new activity by the Enforcement Division’s specialized task force comes on the heels of multiple agency leaders reiterating that ESG remains an agency-wide priority.

Their focus areas in these subpoenas appear to be:

  • Funds that have been revamped as ESG strategies
  • Funds/vehicles marketed in the U.S. and Europe with similar strategies, holdings, and portfolio managers, but differing disclosures

Multi-jurisdictional businesses should keep in mind that the SEC coordinates with other regulators. An example is the resolution discussions the SEC is currently in with a German asset manager after German regulators (BaFin) sued the company.

The SEC’s recent focus on marketing materials may come as no surprise. The SEC has been increasingly focusing on ESG-related matters as firms seek to appeal to ever-growing investor interest in ESG, particularly among European and institutional investors. The temptation is great to present a firm or fund’s ESG practices in the best light possible, however regulators, including the SEC, want to ensure these presentations are accurate. Compliance teams must be mindful of the risks of false or misleading statements in ESG materials (‘greenwashing’), and work together with investment, ESG, and investor relations professionals to ensure clear disclosure of facts and existence of supporting documentation.

Our guidance

We are likely to see additional ESG enforcement actions before the SEC’s fiscal year end (September), in addition to new ESG-related rules later this year. Firms would be wise to start reviewing their ESG statements now for accuracy and consistency. Below is a roadmap to get you started:

  • Inventory exposure to identify marketing materials mentioning ESG. It is important to keep in mind that the SEC’s definition of marketing materials may be quite broad and generally mean any public or private statement made in a document to a current or prospective client/investor. Examples include prospectuses, partnership and/or investment management agreements, websites, RFPs/DDQs, ESG/Sustainability Annual Reports, Form ADV Part 1 & 2A, pitch books, fact sheets, etc.
  • Review materials to highlight any potentially exaggerated or misleading statements.
  • Test statements
    • Interview ESG and/or investment teams regarding the accuracy of statements made
    • Ensure supporting documentation is accessible for claims, commitments, etc.
    • Sample test transactions to ensure ESG diligence and data supports investment decisions
    • Set up a regular cadence of ESG transaction testing
  • Develop/enhance workstreams for compliance review and signoff for any new or updated marketing materials mentioning ESG. This may lead to enhancements to business level changes, such as identifying earlier stages where compliance should be involved (e.g. investment team product development, IC meetings, etc.)

How we help

The ESG requirements are evolving at a rapid pace and require additional resources to meet investor and regulatory expectations. Our ESG services help our clients stay one step ahead of the ever-changing ESG landscape with:

  • ESG mock exams
  • Marketing disclosures and reviews
  • Policy and procedure development and review
  • Portfolio performance assessment

To discuss the SEC’s recent focus on ESG, or to hear our team’s perspective on other ESG issues, please contact our ESG Advisory Practice.

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