FrontLine Compliance exclusive on ESG regulations (Private Funds CFO)

The SEC’s proposed ESG rule and how to prepare for likely new regulations were the subject of an exclusive Q&A feature with FrontLine Compliance Founder and President Amy Lynch. In the interview with Private Funds CFO, Ms. Lynch discusses the SEC approach, what firms should expect from a new rule and the action items firms should be undertaking now. Ms. Lynch provides the following guidance in her responses:

On the SEC approach: “The SEC is looking to gather as much information as possible from the asset management space to essentially determine if these ESG investment practices that funds and advisers are claiming to follow are actually being followed and are properly disclosed to investors and shareholders.”

On what firms should expect from a new rule: “Under the criteria for registered investment advisers…new disclosures will need to be made to investors, primarily via their Form ADV, but also in their offering documents and solicitation materials.”

On what private fund advisers should be most concerned about: “It will be a challenge to put written controls in place when there is yet to be a standardized way to calculate…investment-level criteria regarding environmental strategies and climate change – carbon emissions, greenhouse gases, various energy saving techniques, for example.”

On the steps that firms should be undertaking now: “Step number one is understand the key components that will survive the rulemaking process,…the written policy requirement will almost certainly be within any final rule adopted by the SEC. Firms should look at their current policies…[and] conduct a gap analysis of their current firm practices in relation to the rule proposal….This will help them to identify where changes need to be made…[and] approach things differently from a portfolio construction perspective. This would be a critical area they need to find out sooner rather than later.”

See Private Funds CFO (free view through initial registration), “FrontLine Compliance on making sense of the SEC’s proposed ESG rule”