Each day, environmental, social, and corporate governance (ESG) becomes more relevant in the global financial services market, and it has never been more critical for asset managers to understand the rapidly developing regulatory requirements and investor expectations regarding sustainable investing.
With a truly global footprint and deep understanding of the needs of both fund managers and institutional investors, our Asset Management and Investment Funds practice is perfectly situated to help clients navigate the challenges and emerging opportunities introduced by ESG investing and regulation. For decades, our integrated practice has helped clients launch, manage, and invest in funds and strategies with characteristics across the ESG spectrum. In light of this breadth and depth of experience, clients rely on us to identify and resolve their most challenging ESG issues, respond to stakeholder needs, and design innovative global investment solutions.
We appreciate that the term “ESG” means many different things to different stakeholders, and the proliferation of global regulations, industry standards, and investor attention to ESG matters demonstrate there is no global consensus on the meaning of the term. In this dynamic environment, we recognize that clients must understand the needs and expectations of their stakeholders, and we provide solutions that are tailored to the needs of each individual client.
We have a long history of helping clients frame and implement ESG guidelines, and of helping managers design products that focus on ESG integration in managers’ assessment of the risk and return potential of investments. Some of our recent activities for more traditional ESG managers include:
- Helping clients design new investment products, and respond to recent SEC examinations and investigations regarding the marketing and management of these products.
- Scoping existing products to identify those that meet ESG requirements and determining those that qualify as true ESG funds and products.
- Advising clients on compliance with global regulatory developments and drafting and implementing manager- and product-level disclosure in response to new regulations.
- Representing issuers with respect to compliance with numerous industry and NGO codes of conduct.
Our team has helped clients launch numerous impact investment funds, and also represented global foundations with respect to the design of impact investment programs and investments with impact managers. Recent engagements include:
- Design and implementation of several programs sponsored by institutional investors to stake and facilitate the development of impact managers.
- Ground-breaking launch of the United Nations Capital Development Fund (UNCDF) in its first-ever joint venture with a private sector private funds manager that successfully overcame many sustainability-focused issues.
- Developing impact investment fund structures investing in Asia.
Stewardship and Engagement Programs
We routinely help clients develop stewardship and engagement programs, and navigate the complex and inconsistent regulatory regimes that govern these efforts. Recent engagements include:
- Helping a U.S.-based manager reconcile obligations under the EU’s Shareholder Rights Directive II with significant shareholder reporting requirements under laws in the United States.
- Representing a European stewardship provider before the SEC with respect to the impact of U.S. rulemaking on their global business.
- Counseling an Australian superannuation fund on its obligations to consider climate change risk in its investment governance framework.
- Advising the board of a public sector entity on its directors' responsibilities to assess climate related risks.
- Assisting an Australian family office investor in measuring the social return of their investment policy and individual projects.
- Assisting institutional investors in numerous jurisdictions with reviewing and negotiating ESG policy-related compliance and reporting requirements for a broad range of alternative investment funds.
Tailored, Regional Insights
With our global reach, we can offer our clients tailored, regional insights into a wide range of markets with varying levels of ESG integration. While ESG regulation has for political reasons been a slow burn in the United States, sustainable investing in the UK and EU took root sooner and has taken a firmer grip on the legislative and regulatory landscape. The EU has seen the most significant roll out of new ESG legislation of any region to date. The EU Commission is the driving force behind the new ESG requirements, and has been producing an unprecedented level of new regulation. We understand not only the legislative and regulatory climate of specific regions, but also how they may influence or diverge from one another. Although both UK and EU are further along the ESG curve than the United States, their approaches are expected to diverge, with the UK taking a less prescriptive approach.
In Australia, financial services regulators are becoming more assertive with disclosure obligations of investment managers who offer ESG or impact products as investor expectations increase. Accordingly, Australian asset managers are far more aware of the need to consider ESG principles when compared with just a few years ago. Conversly, the integration of ESG factors into investment processes has generally lagged in Asia, with some notable exceptions. Hong Kong and Singapore are among a few governments that are promoting ESG as part of their agendas for economic growth.
Whether in the UK, EU, Australia, Asia, or the United States, we help clients map out forward-looking global ESG strategies by:
- Closely monitoring regulatory bodies such as the United Kingdom’s Financial Conduct Authority, the Australian Prudential Regulation Authority, and Hong Kong Monetary Authority.
- Performing a regulatory watch on emerging legislation and regulation to help firms manage the impact of ESG requirements on their funds and other investment products.
- Tracking the industry leaders’ response and analyzing their short- and long-term impacts.
- Facilitating ties with key industry groups, such as the European Fund and Asset Management Association–the voice of the European investment management industry–and the Investment Association in the United Kingdom.
- Observing investor groups such as Responsible Investment Association Australasia, which presents voluntary codes, practices, and certifications around ESG investment.