On March 28, 2025 CFA Society Chicago Education Advisory Group hosted “Standards Ethics and Regulations Road Map” which included two panel discussions, each an hour in length and moderated by Michelle McCarthy Beck, senior advisor at Iron Road Partners, where she provides expert support to investment advisers with a focus on effective compliance programs, particularly with respect to derivatives, leverage, liquidity, Form PF, Form N-PORT, and analytical model risks.
The first session entitled “ESG and Sustainability Conversation” featured Ana Maria Camelo Vega, Senior Economics and Finance Researcher at the Columbia Center on Sustainable Investment; and Uwe Schillhorn, CFA, Chief Investment Officer at the Cook County Pension Fund.
Following some brief introductions, Uwe commented on the EU approach to ESG and other initiatives. He also discussed the Trump administration’s approach to programs that don’t have immediate tangible benefits. He noted EV charging stations as an example of a $5 billion program cancelled in early 2025. There is still some funding coming from state and local levels, but this has a big impact.
He highlighted that the Supreme Court ruled against Trump’s plan to cut foreign aid, and there may be delays and legal contests to achieve that administration’s goals.
Net Zero banking alliance has seen changes. It is aligned with the Paris accords, and since the US left the accord, many big banks have decided to leave that alliance.
Michelle discussed the concept of recession in ESG as US government and corporate priorities shift.
Ana noted multiple priorities fighting for funding, attention, and resources. At the federal level we are seeing backlash but seeing more push for ESG/Sustainability goals at state, local and international levels. This shows there is still global interest in these initiatives. Geopolitical priorities are shifting with ESG and environmental goals. She noted there are still huge challenges and the need for more transparency for investors to engage in climate investment.
The conversation then turned to performance for the sector. Performance is good, but there is still not a good understanding of risk, barriers to scaling private capital into the emerging market in ESG investing. It seems impossible to perform analysis due to lack of data on performance. Investors are challenged to mitigate investor risk vs climate risk, and how to measure this impact.
Uwe noted a number of studies that some show might be better some might be worse, but none that show it is really worse, so there may be no cost to doing “good.” Sustainability
funds and ETFs had big outflows in 2024. Only 10 were launched vs. 66 in 2023 and more than 100 in 2021 and 2022, while 71 funds merged or liquidated. Even without performing badly, investors just weren’t interested.
The discussion then turned to whether ESG marketing was too aggressive with “outperformance” promises.
Uwe noted it could be a factor, especially as the markets (S&P and Nasdaq) were tough to outperform.
Ana agreed with the marketing question, noting ESG marketing is still flawed as we should look more for sustainability than ESG, as it implies there is some profit in it. She thought the marketing didn’t work as intended but may work best for a longer-term investment.
The discussion shifted to SEC rulemaking and enforcement affecting this area.
There was an enforcement action last year on greenwashing, SEC fined the asset managers for not disclosing certain investments in ESG labeled funds. How does this change with new administration? SEC issues rules and enforces them, and Trump administration is very negative on “unelected bureaucrats” making laws. But given this was against ESG funds, the Trump administration would more likely support.
SEC disclosure requirements were introduced but watered down, and funds only need to report when it is material to investors. Smaller companies are exempt as well. Now lawsuits have been filed, and even so, Uwe believes the reporting requirements are dead. Still some states and other countries have reporting rules, which will have some impact on many companies.
Michelle sked how should investors approach ESG, are there more “rocks to be overturned”?
Ana noted there is a lack of standardization so it’s overwhelming when there are no standards. How to align their own standards with what is working globally within the scope of sustainability. Emerging markets still have significant opportunities that are performing well, including biodiversity. Investors need to consider what we need to do to scale finance and improve our investments and scalability. Adaptation for investors as infrastructure creating plan that allows integration of natural condition into adaptability/resilience. It is hard to see returns due to the long-term time horizon for such projects.
Uwe noted many institutions understand this and can influence the governments to reduce country risks.
Next the panel addressed the topic of whether US investment professionals should be concerned about working in this area.
Two years ago, it was very much in demand, but now it’s not. It may not be the administration coming after you or just market changes. What you’re doing needs to attack the problem but must be financially material.
The panel then offered their final thoughts.
Ana noted the world is advancing with or without us and we need to participate. Financial reality and risk are still the same, with transformation there is an opportunity.
Uwe noted that ESG is in recession from a regulatory side but not so much from a technology perspective. The technology is here, reporting requirements are complex, but we can leverage the data and technology.
The second session entitled “Regulation Conversation” featured Allyson Buckels, CFA, Director at Grandview Analytics; Deborah (Debby) Eades, CFA, JD, shareholder in the Investment Services Group of Vedder Price P.C.; and Johanna Anders, Head of Regulatory Compliance at Harris Associates.
Following some brief introductions, the panel was asked for an update on what they saw as emerging regulatory trends. Debby started the conversation by discussing what investment professionals need to know in the regulatory environment with the new administration. She noted a record number of rules and a record number of challenges to rules. On the negative side, she noted office closures, staff reductions, and the need to “beg” staff to give clients time for new product reviews.
She noted there is a lot going on in rulemaking including mutual fund naming rules, disclosure record keeping and compliance. For example, eliminating ESG from name is an area where staff could still focus, but it is hard to bring action for breach of fiduciary duty vs. specific rules. Reg PF was pushed to June 2025, from March for updating subscription documents and questionnaires. Looking to 3P administrators to cover. Trump agency requested pause on new rules, resulting in the shift of holdings disclosures from quarterly to monthly to be delayed (maybe reversed).
Alyson noted that rules on GIPS have been light since 2020, though there are new outsourced CIO rules.
Johanna provided an update on compliance and SEC marketing rule, shift from substantial reasonableness to substantiation on performance data, along with consistent time periods. She discussed hypothetical performance and back testing with additional
disclosures. Standardized presentation is another factor, and hypothetical performance has a higher risk with new regulation on marketing materials.
Debby addressed concerns about consistency on field offices, and the administration not pulling things back to DC is viewed positively by most market participants.
Next the panel moved to a discussion of private asset and crypto regulations.
Debby noted the proliferation of products to bring access to private equity and private credit markets. She talked about changes to the 15% limit on private investment to sell to retail investors, but that this is not a statute nor a rule, so could be a change of view among regulators. This shift might not impact open end funds due to their existing limit of 15% on illiquid assets. She addressed changes in rules on coinvesting allowing investment companies to invest along with private funds in assets.
On crypto the general consensus was to expect more friendly policies from the current administration. This will bring more to financial innovation and reduced regulatory burden. Debby noted this is a really a sea change from the prior administration.
Alyson addressed questions on GIPS implications for blending private and public assets in funds.
Johanna addressed some common areas of improvement for compliance programs noting they become much more dynamic as you build alignment between words, actions, and outcomes – viewing compliance as partner vs gatekeeper.
The conversation then turned to the global environment and enforcement actions, and specifically if we will still see greenwashing or other enforcement actions.
Debby noted regulators are looking for alignment of words, actions, and outcomes so that could generate enforcement on marketing materials for ESG products. She also highlighted valuation and liquidity focus on credit-based ETFs especially in the 40-Act space. Turning to gatekeepers, she noted fund administrators tightening contracts for gatekeepers that have been sued but are acting as agent of the manager.
As an example, she cited the case of Two Sigma – model/compensation/risk assessment that resulted in $90 million in fines and $160 million in compensation to clients. This case surrounded a person with conflict of interest changing models.
Finally, she mentioned off-channel communication with fines tied to size of firm vs. subject matter. All constituencies need to have understanding of firm point of view on disclosures with technology changes like AI.
Next, the discussion turned to what having a compliance partnership should look like.
Johanne noted the need to understand where the busine is trying to go and how can we get there from a compliance perspective. For enduing effectiveness she emphasized the need to get legal and compliance involved early as they all want to bring initiatives forward.
Alyson noted that compliance can’t help you if they don’ t know what’s going on, so keep the team informed as early in the process as possible.
The panel then offered their final thoughts.
Jhanna noted the regulatory environment will continue to evolve so partnership with compliance is key – behavior, trust, resilience as a road map vs. roadblock in building the business. Proactive technology/best practices will be key as AI will separate those who can scale responsibly vs. those who stumble into enforcement actions.
Allyson expressed a need to keep in mind the concept of fair and balanced, you can’t disclose away something that is not quite right. If it takes a lot to explain, maybe ask why/whether it should be disclosed. Finally, she urged participants to comment on proposed regulatory changes in the public comment periods as they will influence the final rule.
Debby highlighted that regulation and compliance are a dynamic process, technology changes are breathtaking, keeping abreast of technology development with alignment across businesses. The number of innovative products coming to market is impressive, bringing legal and compliance sooner rather than later. Stay up to date on new developments!