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SEC continues to push ahead with ESG inquiries (2022)
| Environmental, social, and corporate governance |
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| • What is ESG? • Enacted ESG legislation • Arguments for and against ESG • Opposition to ESG • Federal ESG rules • ESG legislation tracker • Economy and Society: Ballotpedia's weekly ESG newsletter |
The Securities and Exchange Commission (SEC) continued last week to do as its Chairman Gary Gensler promised it would when he took over the Commission in the spring of 2021, namely cracking down on what it sees as a discrepancy between ESG funds’ promises and their records:
“US regulators are expanding their crackdown on misleading labels of investment products with a probe focused on whether managers of funds that are marketed as sustainable are trading away their right to vote on environmental, social and governance issues.
"For the past several months, Securities and Exchange Commission enforcement lawyers have been peppering firms offering ESG funds with queries, including how they lend out their shares and whether they recall them before corporate elections, according to four people with knowledge of the matter. The practice lets asset managers earn fees that benefit investors, but it can also impact the ability to cast ballots.
"The SEC’s investigation delves into whether asset managers are making the proper disclosures to investors, said the people, who asked not to be named because the queries are private. It drives at the heart of whether ESG investment funds are able to meet their promise of helping combat societal ills through long-term investments in certain companies, especially if shares they lend out wind up with short-sellers taking an opposing view….
"When it comes to proxy voting specifically, ESG money managers have been on the defensive at the SEC for more than a year.
"In March 2021, Allison Herren Lee, a former Democratic Commissioner who was acting as SEC chair, said funds should disclose more on how they vote for investors on related issues. The pressure has continued with Gensler pushing a plan introduced in May that could require funds to explain how proxy voting fits into strategies that purport to consider ESG factors….
"The SEC enforcement division’s asset management unit, which polices fund disclosures, is leading the probe, according to one of the people familiar with the investigation.
"While it’s unclear if the securities-lending probe will lead to the regulator suing firms or investment advisers, the agency has started bringing cases over ESG disclosures."
See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
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