Kirkland & Ellis Releases Alert Highlighting SEC Scrutiny of ESG Claims by Advisers

Kirkland & Ellis recently published factors that advisers may want to consider after the SEC’s November settlement with Goldman Sachs Asset Management (GSAM). The SEC alleged that GSAM “failed to adopt procedures to ensure compliance with certain ESG claims made to GSAM clients/investors and then, once adopted, failed to follow such procedures.” The alert highlights how the fact pattern of the GSAM case varied slightly from the BNY Mellon order the SEC announced last May, but emphasizes the SEC is proactively looking at “all statements made about an adviser’s ESG strategy and is willing to bring enforcement actions regarding any perceived gaps between communications to investors/clients on ESG, an adviser’s ESG compliance policies and procedures and the adviser’s actual ESG investment process.”

Kirkland & Ellis enumerates several considerations for advisers with ESG products, including:

  • Conduct an inventory of firm statements and investor communications on ESG investment products
  • Train staff on ESG policies and procedures
  • Regularly review the firm’s ESG policy to confirm the strategies and funds to which they apply
  • Identify what records are required to demonstrate implementation
  • Include ESG questions in SEC exam preparation exercises