SEC commissioner Elad Roisman, one of the four leading officials at the US regulator, has called for ESG labelling from fund groups to be made clearer.
However, at the same time Roisman is wary about more “prescriptive” ESG disclosure requirements being introduced for listed companies.
Giving the keynote speech at the Society of Corporate Governance’s virtual national conference, Roisman said asset managers had a responsibility to better explain how they fulfil labels such as ‘ESG’, ‘green’ and ‘sustainable’.
He told delegates: “I do think that retail investors who want green or sustainable products deserve more clarity and information about the choices they have.”
“When an asset manager markets a fund as having an ESG strategy, it has an obligation to disclose material information about that fund to investors and potential investors,” he said.
Additionally, he said it would make sense for asset managers that wanted to use terms under the general ESG banner in fund names or marketing to be required to explain to investors what they mean.
This call to action stems from a concern that some asset managers may be using ESG as a “virtue signalling tactic” and misleading investors through greenwashing. He added: “I think many [investors and regulators alike] would be interested in such disclosures and whether these asset managers’ actions match their rhetoric.”
However, elsewhere Roisman admitted he has “serious reservations” about such disclosures being extended to listed companies. This follows a recommendation from the investor advisory committee that sits within the SEC, which argued that the US risks falling behind the UK and Europe in this field.
“This type of mandated disclosure is often fraught with subjectivity and agendas that are often unrelated to ‘investor welfare’,” said Roisman.
“In other words, I have seen too many people appear to blur their personal views on environmental and social issues with how they believe the federal securities laws should operate to regulate the actions of others.”
The speech came as US senators are demanding more time to examine a controversial new Department of Labor rule that could have severe negative implications for US ESG investing.
Announced at the end of June, the proposed rule would see US pension funds inhibited from making ESG investments unless they could satisfy it was for a purely financial return.Last Updated: 17 July 2020