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ARTICLE · 20 DECEMBER 2019

SEC Scrutinizing ESG Funds

Jones Day
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The U.S. Securities and Exchange Commission ("SEC") is scrutinizing the methodologies and criteria of investment funds that embrace environmental, social, and governance ("ESG")

United StatesCorporate/Commercial Law
David Woodcock
David Woodcock
Emily E. Leitch
Emily E. Leitch
Linda Hesse
Linda Hesse
Corey L. Zarse
Corey L. Zarse
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The U.S. Securities and Exchange Commission ("SEC") is scrutinizing the methodologies and criteria of investment funds that embrace environmental, social, and governance ("ESG") strategies as record amounts of money flow into ESG funds.

In response to client/investor demand, the number of investment funds that embrace ESG strategies has significantly increased. While this relatively new investment style is capable of yielding societal benefits, it also presents compliance and regulatory challenges for investment managers (e.g., ensuring that investments meet, and continue to meet, the often amorphous disclosed investment criteria).

Recently, as confirmed by press reports, the SEC's examination branch, the Office of Compliance Inspections and Examinations, has conducted exams of investment advisers that manage investment funds that take ESG-related factors into consideration when making investment choices for clients.

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