The focus on ESG will continue to grow under Biden Administration – Corporate / Commercial Law

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In 2021, the global impact of environmental, social and governance investments (“ESG”) will continue to grow, with important implications for the wealth management industry. The new European regime for disclosures on sustainability in the financial sector will be introduced in March 2021 and will affect both European and non-European asset managers equally. In the US, where there is no specific ESG-related regulatory structure, investor demand for ESG-focused strategies is driving fund managers to allocate additional resources in the region. Additionally, the Biden administration’s early focus on the environment is likely to lead to closer scrutiny by the SEC. The SEC’s auditing department is prioritizing reviews of ESG-focused strategies and will use the existing US regulatory framework to review ESG-related disclosures.

On February 1, 2021, the SEC announced that Satyam Khanna would serve as Senior Policy Advisor for Climate and ESG in the office of incumbent SEC chairman Allison Herren Lee. In this new role, Mr. Khanna will advise the agency on ESG matters and drive related new initiatives in their offices and departments. In the coming year, the SEC is likely to increasingly focus on whether asset managers have adequate policies in place to support disclosures about ESG strategies and performance. With this in mind, fund managers should seek to avoid “greenwashing” – the practice of borrowing for an environmental impact that may not be justified – as the SEC may see it as an impact on anti-fraud rules. To ensure compliance, fund managers should continue to develop robust ESG policies that support the disclosure of ESG strategies and processes.

Read more about our top ten regulatory and litigation risks for private funds in 2021.

The focus on ESG will continue to grow under Biden Administration

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