It has become abundantly clear that the Office of Compliance, Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission is focusing efforts on advisers who advertise and manage investment strategies, portfolios and funds that consider factors or matters that relate to ESG or SRI. In fact, OCIE Director Peter Driscoll said as much while he was addressing the Investment Adviser Association Compliance Conference today, on March 6, 2020.
Prior to those remarks, OCIE has issued one or more requests to investment advisers as part of examinations that are focusing on topics relevant to advisers who manage and advertise ESG and SRI strategies, portfolios, and funds. For advisers who advertise and manage these strategies, portfolios, and funds, they should be aware of where OCIE is focusing its efforts. As one can see from the request list below, OCIE is placing its focus on:
- the scope and definition of the terms ESG and SRI for investment purposes;
- whether the adviser adheres to the UN Principles for Responsible Investment, and if so, whether it maintains written documentation of these selection principles;
- whether the adviser has submitted shareholder proposals for the companies that it invests in;
- whether the adviser has proxy voting authority, and if so, examples of documentation used to form the basis for certain votes on ESG and SRI matters;
- advertisements that discuss ESG and SRI investments; and
- the investment performance of ESG and SRI investments.
The last one is notable in that it seems OCIE may be prepared to question whether ESG and SRI investments were consistent with an adviser’s duty of care.
