What You Need To Know: The SEC recently examined investment advisers, registered investment companies, and private funds that offer ESG products and services. SEC examinations resulted in finding inadequate and inconsistent firm ESG-related approaches, but also examples of successful firm approaches to ESG investing. When implementing ESG-related investment practices, firms must be consistent, clear, and transparent regarding their ESG-related investment goals. On April 9, 2021, the U.S. Securities and Exchange Commission (the SEC) released results from its recent examinations of particular investment advisers, registered investment companies, and private funds (the firms) that purport to offer environmental, social, and governance (ESG) products and services. The SEC observed a large discrepancy between the ESG-related disclosures of these firms and their adopted and implemented ESG practices. The SEC examinations found that firms undertake ESG practices for a variety of reasons, often believing investments with favorable ESG profiles may result in higher returns. However, the SEC found that once they do implement such ESG-related approaches, the firms lack the necessary internal controls and compliance programs to achieve consistency between their stated approaches and actual adherence to such approaches. Consequently, this inconsistency results in making unsubstantiated or otherwise potentially misleading claims about their ESG approaches to the firms’ clients. In its findings, the SEC provided valuable insight into avoiding the pitfalls of implementing misleading ESG-related practices by highlighting the ESG-related strategies of firms that maintained clear, precise, and consistent ESG policies, procedures, and practices.