SEC demands disclosure documents from ESG fund managers

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A number of asset managers have received legal requests for documents linked to their ESG fund marketing from the US Securities and Exchange Commission’s enforcement division, according to reports.

The FT reported that SEC lawyers had subpoenaed various fund managers regarding ESG disclosures.

The move pointed to a potential tightening of the rules around ESG investing, or action against those fund managers found not to be following them.

The SEC was said to be particularly interested in conventional investment funds that have rebranded as ESG funds.

Yann Bloch, vice precedence for product management for the Americas at NeoXam, a financial software company, said the SEC will be aware that when making such a significant shift in the direction that a fund takes, the operational requirements behind the scenes need to change dramatically. 

“You are dealing with totally different types of data, often sourced from a greater number of providers and in varying formats,” he said.

“To have success, firms have to empower the ESG specialists, investment teams, and reporting teams, by providing them with real, quality, and transparent data around all three elements of ESG when analysing assets.”

Another focus were funds offered in the US and Europe with very similar strategies, managers and holdings, but where investors are given differing amounts of information depending on where they are based.

Emilie Rowe, ESG lead and head of financial services at Aspectus Group, said the SEC investigation “reaffirms the necessity for an ESG communications strategy to be grounded in real business strategy”. 

“If these funds can truly evidence ESG credentials, then fund managers need a very clear, considered communications strategy in place before launching marketing efforts,” she said.

“With the regulator’s focus now turning to this burgeoning area of the market, firms need to ensure that their communications and distribution efforts are reflective of the investment strategies employed by such funds.”

This latest regulatory demand for information from the ESG fund management sector follows the formation of a task force within the SEC enforcement division in March 2021 to crack down on misconduct in ESG investment disclosures.

The SEC has previously settled cases against companies and asset managers over ESG claims, including Goldman Sachs and BNY Mellon in 2022, but none have been filed so far this year.

That may change as new investigations proceed, lawyers told the FT. Last month the German asset manager DWS disclosed it had set aside €21mn to settle an “ESG investigation” from the SEC and other regulators.

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