SEC commissioner: ‘investment advisers can only pursue ESG if clients express desire’

In a recent speech, US Securities and Exchange Commissioner Mark T Uyeda outlined the regulator’s approach to the asset owner/asset manager relationship in ESG investing. According to Uyeda, the key factor to consider is whether the asset owner expresses a clear desire and informed consent to pursue ESG strategies. In addition, the agreement between the two parties must be preceded by full disclosure by asset managers regarding the risk and returns associated with the strategies. He said: “The Commission recognises that an adviser and its client may shape the advisory relationship by agreement, provided that there is full and fair disclosure and informed consent. This means that an adviser can only pursue an ESG investment strategy if the client expresses a desire to pursue such a strategy after receiving full and fair disclosure regarding the salient features of the strategy, including the strategy’s risk and return profile.” Notably, the SEC has recently brought enforcement actions against asset managers suspected of misstatements.