In brief: SEC targets ESG ‘greenwashing’ as a top priority for review

The regulator is considering rule proposals for ESG disclosures and private funds compliance.

‘Greenwashing’ is a top two priority for the US Securities and Exchange Commission this year. The agency’s Division of Examinations listed ESG investment issues as the second item on its 2022 agenda. Item one on the agenda is the behaviour of private funds.

“There is a risk that disclosures regarding portfolio management practices could involve materially false and misleading statements or omissions, which can result in misinformed investors,” the SEC’s examinations agenda stated.

The commissions’ exams division said it is reviewing the ESG investment practices of registered investment advisers based on three criteria:

  • Are ESG investment approaches accurately disclosed, including portfolio management?
  • Do voting client securities align with ESG-related disclosures and mandates?
  • Are ESG factors overstated or misrepresented (‘greenwashing’) in performance advertising and marketing?

The SEC’s examinations agenda follows the agency’s unveiling last week of a landmark rule proposal mandating climate disclosures from publicly traded companies. Two rule proposals currently under consideration at the SEC’s Division of Investment Management target ESG claims and disclosures, as well as fund names used by registered investment advisers.