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The SEC – and Celent – have crypto and ESG in our sights for 2022

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12 April 2022
Monica Summerville

In its recently published 2022 Examination Priorities, the U.S. Securities and Exchange Commission (SEC) has indicated that both “environmental, social and governance (ESG) investing” and “emerging technologies and crypto assets” are two of its four areas of significant focus in 2022. Celent has also identified these as key research topics with related reports planned for this quarter and continuing through the year.

Recent interview-based research by Celent with buyside firms confirm that both ESG and crypto are areas that firms are looking to increase focus.We asked chief data officers at 100 buyside firms to identify the emerging and new data sets they are looking to source and integrate into their business in the next 12-18 months. Nearly half cited digital/crypto assets and one-quarter cited ESG (see Figure 1 below - registered useres of Celent.com only).

Celent is currently researching the technological challenges to capturing, measing and monitoring for ESG factors. We will look at specific use cases for ESG data across the investing and trading workflow and assess how vendors are tailoring their solutions to meet these use cases.

The SEC’s Division of Examinations states it prioritizes examination of focus areas that pose “unique or emerging risks to investors or to the markets”. In addition to ESG and emerging tech/crypto, the SEC’s other two focus areas are private funds and standards of conduct issues for broker-dealers and registered investment advisors (RIAs).

The SEC’s Examination Priorities publication notes that investments that employ ESG strategies or incorporate certain ESG criteria are being increasingly offered to meet investor demand. However, the SEC sees disclosure risks around portfolio management practices that could lead to misinformed investors. These risks are compounded by

• a lack of standardized ESG terminology.

• a variety of ESG investing approaches.

• the failure to address legal and compliance issues with new business lines and practices.

The SEC is not the only regulator asking questions around ESG data. The UK’s securities regulatory, the Financial Conduct Authority (FCA) published a consultation last year inviting views as whether ESG data and rating providers’ activities should be brought within its regulatory perimeter. In December 2021, the FCA’s Perimeter Report 2020/21 noted that a feedback statement on the topic should be published in the first half of this year.

When it comes to crypto/digital assets, the SEC says it has observed a “proliferation of the offer, sale, and trading of crypto-assets”. The report also notes that areas of focus for examinations include custody arrangements and compliance practices including custody practices, valuation procedures, and operational resiliency practices including data integrity and business continuity plans, among other things.

The full SEC document can be accessed here and Celent’s Capital Markets Q2 research calendar can be accessed here.

For more data-driven insights based on our interivews with buy side CDOs, please see our latest research report, Enterprise Data Management Visions and Trajectories 2025 - Part 2 here.

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