Environmental, social and governance (ESG) strategies are increasingly popular with investors and fund managers, which has prompted the SEC to take more of an interest in fund manager practices in this area. The SEC’s Office of Compliance Inspections and Examinations (OCIE) recently announced plans to review ESG investing with “particular interest” as part of its 2020 examination priorities. Some in the private funds industry are concerned, however, that OCIE’s scrutiny of ESG investing may have already begun. Some fund managers have reported receiving extensive document requests from OCIE – such as the sample version contained in this article (Sample SEC Request) – about their ESG investing practices, including their disclosures, marketing, use of metrics, internal controls and other policies. To understand the scope of the SEC’s efforts to date and going forward, the Private Equity Law Report examined the Sample SEC Request and interviewed practitioners involved in recent OCIE exams that have covered ESG investing. This first article in a two-part series analyzes the SEC’s recent approach to ESG oversight and what it could mean for fund managers. The second article
will focus on ESG‑related risks for private funds managers facing SEC scrutiny, along with steps managers can take to mitigate those risks in advance. For more on SEC examinations, see “PE Expectations for 2020: SEC Examinations, Regulatory Developments and Compliance Measures to Adopt (Part One of Two)
” (Jan. 7, 2020).