The US Securities and Exchange Commission (SEC) intends to combat exaggerated environmental, social and managerial powers in investment products by preparing rules for the stable fund industry.
The rules will specify the disclosure of information to be carried out by investment funds, the name of which includes terms such as "ESG", "stable" or "low-carbon", according to Financial Thimes.
The rules will require information on how ESG funds are sold, how ESG is involved in investing, and how these funds vote at annual company meetings.
According to the data provider Morningstar, at the end of the first quarter of 2022, the assets of global sustainable development funds amounted to $ 2.77 trillion compared to $ 1 trillion in 2019. The broader category of ESG investment covers environmental and climate considerations, investment in social welfare, and funds that provide tobacco and firearms.
"There is now a wide range of things that asset managers can understand by certain terms and what criteria they can use. It may be time to make it easier to determine if a fund really is who it claims to be," said Gary Hensler. head of the SEC.
The vote on the draft rules for public discussion is scheduled for May 25.
The agency has already voiced a tougher stance on the issue. An $ 1.5 million legal settlement has been announced for the first time with descriptions of ESG funds against BNY Mellon's investment advisers over allegations of misrepresentation and omission of information on ESG criteria for mutual funds it manages. BNY Mellon noted that none of the proposed stable funds was a target regulator and that it updated its fund materials.
The draft SEC rules follow from an analysis of the ESG market conducted in April 2021. It is based on the "rule of naming" adopted in 2001, according to which funds must invest at least 80% of assets in the way suggested by the name. For example, an equity fund may not hold more than 20% of cash or treasury bonds.
Jill Fish, a professor of securities law at Penn Law, warned that tough regulations in the field of ESG could have a negative impact on market innovation in this area. Disclosure of funds has already become more "widespread" in areas where there is no market consensus on what an ESG fund is.
"The rule that seeks to standardize what the ESG fund is will be a big step backwards for people who want to invest in this space. Standardization is not the same as clarity," Fish said.
The SEC also proposed tougher recommendations on corporate climate disclosure, promulgating rules in March that would allow state-owned companies to disclose their direct greenhouse gas emissions and verify them with a third party.
The Association of Investment Advisers has called on the SEC to give leeway in its proposal for the trustworthiness of professionals to clients.
"We will be concerned if the SEC restricts or forces fiduciaries to take into account any factors, including the ESG," said Gail Bernstein, IAA's general counsel.
Jennifer Hahn, head of global regulation at the Managed Funds Association, said any rule should help clarify alternative asset managers involved in ESG strategies and be calibrated to meet the different needs of institutional and retail investors.
We will remind, 58% of CEOs in the world confessed to greenwashing.
As EcoPoliticа reported earlier, in the United States investors of leading banks did not support climate proposals.
