Jul. 1, 2021

Five Key Articles on ESG for Hedge Fund Managers

Nearly every day, the media publishes articles on environmental, social and governance (ESG) issues, whether the focus is on corporate disclosures around climate change efforts and the diversity of board members or private funds claiming to invest through an ESG lens. Recent surveys show that investor interest in ESG is also on the upswing. For example, one study found that a majority of hedge fund managers are incorporating ESG factors into their investment processes – driven, at least in part, by investor demand. Thus, it’s no surprise that the government has also increased its focus on ESG. The SEC has taken concrete steps toward regulating ESG-related issues, primarily in terms of disclosures. For example, on April 9, 2021, the Division of Examinations (Examinations) released a risk alert on its review of ESG investing, which the Hedge Fund Law Report is currently covering in a two-part series. Additionally, the SEC’s Spring 2021 short-term “Reg Flex” agenda indicates that the Division of Investment Management is considering recommending that the Commission propose requirements for investment companies and investment advisers related to ESG factors, including ESG claims and related disclosures. To that end, the Hedge Fund Law Report is highlighting five articles from the archives on ESG. These articles address the history of ESG investing in the hedge fund industry; ESG investing policies; ESG considerations in the U.S. and globally; ESG’s transformation of investing in the near future; investors’ use of ESG factors in selecting hedge fund managers; and Examinations’ focus on ESG investing practices in exams. Next week (the week starting July 4, 2021), the HFLR will resume its normal weekly publication.