SEC Working On Pending Rules On Misleading ESG Investment Claims: FT

  • Securities and Exchange Commission is preparing rules to specify disclosures to be made by investment funds with terms such as environmental, social, and governance (ESG), sustainable, or low-carbon in their names. 
  • Financial Times writes that the broader ESG investing category covers environmental and climate considerations, "impact" investing for the social good, and funds that screen out industries such as tobacco or firearms.
  • On Monday, SEC announced a $1.5 million legal settlement, first related to funds' ESG descriptions, against BNY Mellon's investment adviser division over allegations of misstating and omitting information about ESG criteria for mutual funds it managed. 
  • According to Morningstar, in the US, 65 funds have been repackaged into ESG funds since the beginning of 2019. 
  • Funds struggling to attract inflows changed their names and prospectuses to ride the sustainable investing wave, said Jon Hale, director of sustainability research for the Americas at Sustainalytics, a Morningstar company.
  • Related: 'Ridiculous,' 'Wacktivism:' Cathie Wood, Elon Musk React To Tesla's Removal From S&P 500 ESG Index
  • Recently, Tesla Inc TSLA was booted out of the S&P ESG index, after which Elon Musk called ESG a scam.
  • The commission is also catching up with regulators in Europe. The EU's sustainable finance taxonomy, which would establish a list of eco-friendly economic activities, is expected to be approved by the European parliament in July.
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