The integration of environmental, social and governance (ESG) factors into the investment process has become a primary objective of certain investors. According to EY’s recent 13th annual Global Alternative Fund Survey, nearly three in ten investors said that they presently invest, or plan to invest, in products that incorporate ESG criteria, and the overwhelming majority of investors said that an alternative manager’s internal ESG policy was either critically or somewhat important when deciding whether to invest with that manager. See “EY 2019 Survey Finds Hedge Funds Losing Ground to PE; Need for Cost Controls; and Growth of Non‑Traditional Investment Products, ESG and Separate Accounts (Part One of Two)” (Dec. 12, 2019). The SEC has also started to focus on ESG, reportedly examining advisers’ criteria for determining whether an investment is socially responsible, along with their methodologies for applying those criteria and making investments. Nevertheless, the adoption of formal ESG policies by hedge fund managers remains fairly uncommon. The first article in this two-part series explores the development of ESG investing and its prevalence in the hedge fund space. The second article reviews advice from industry experts on considerations for managers wishing to develop an ESG investment policy, as well as the due diligence demands from investors seeking investment managers that incorporate ESG factors into the investment process. For more on ESG, see “Luxembourg Plays Prominent Role in ESG Investing and Sustainable Finance” (Nov. 21, 2019); and “Preparing for the Impact Revolution: How Fund Managers Can Implement the Philosophy of ‘Doing Well by Doing Good’” (Mar. 21, 2019).