Preparing for ESG Regulation
Vigilant Insights
Brief Introduction
As the SEC continues to focus on enforcement related to ESG, Firms should take the necessary steps to prepare for the possible compliance issues ESG may bring.
Regardless of one’s opinions on the matter, there is little evidence that the SEC is wavering in its commitments.
In this current regulatory environment, “on the fly compliance” puts firms at a high risk of regulatory burden.
Below are steps Firms can take to stay proactive.
Preparing for ESG
- Understand that the expectations related to ESG will likely be greater than a box to check off on a list of compliance tasks. Regulators will likely be looking at every step in the decision-making processes of the business and comparing them to commitments made in ESG disclosures.
- Maintain a consistency across the organization when it comes to defining ESG in Firm policies, providing ESG disclosures, and referring to ESG in company communications.
- Be prepared to back up all statements related to ESG with data. Substantiation is the word of the day, year, and decade. The SEC has already charged Firms for falsely advertising ESG in their products.
Vigilant’s Conclusion
Although aggressive debate continues related to the merits of ESG in the financial industry, it is important that Firms are prepared for during a time when a record number of rules and amendments are being finalized.
As part of your culture of compliance, it is vital to assess all policies and procedures related to ESG (and any other branding of investment vehicles).
It would be prudent to utilize compliance professionals to assess your policies and procedures to ensure they support your business goals and decrease your risk of regulatory burden.
Reach out to Vigilant with any questions or concerns you may have.