SEC hits ESG funds with subpoenas
The enforcement division of the Securities and Exchange Commission has issued formal requests, including subpoenas, to a number of investment firms over their sustainable investment advertising practices. This escalation shows the SEC’s heightened scrutiny on environmental, social and governance funds.
A significant point of concern for the SEC includes mainstream investment funds transitioning into ESG-focused entities. Additionally, there’s interest in funds marketed both in the U.S. and Europe that may possess similar investment strategies, assets or management teams, yet provide varying levels of disclosure depending on the region.
The SEC established a dedicated team of 22 headed up by Kelly L. Gibson in 2021 to “root out ESG-related misconduct.”
“Investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies,” saidSEC Chair Gary Gensler. “Investors need reliable information about climate risks to make informed investment decisions.”
While some ESG-related settlements, involving firms like BNY Mellon ($1.5 million fine) and Goldman Sachs ($4 million), took place in 2022, no such cases have been reported yet this year.
However, this could change with ongoing probes. For instance, German investment firm DWS recently reserved €21 million for a potential ESG-related settlement with the SEC and other bodies.
Former SEC commissioner Michael Piwowar, currently at the Milken Institute, told the Financial Times to “anticipate more regulatory actions emerging shortly.”
Global assets in sustainable investments surged to $3 trillion in 2021 from $1 trillion in 2019, as reported by Morningstar.
Read more on investmentnews.com
