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It has been publicly reported that the SEC’s Enforcement
Division has been “sen[ding] document requests, including
subpoenas” to asset managers in connection with ESG marketing.
This development is entirely unsurprising, as ESG and climate
change issues have been a priority for the SEC under the Biden
Administration.
Further, the fact that these actions by the SEC’s
Enforcement Division are apparently targeting “conventional
investment funds that have repurposed themselves as ESG funds”
dovetails with the SEC’s focus on the phenomenon of
“greenwashing,” i.e., when organizations make exaggerated
or inaccurate claims about the degree to which their investments or
activities are environmentally-friendly. This policy focus has
included a proposed rule by the SEC (initially proposed in May
2022) that would effectively compel any investment fund claiming to
be an ESG fund to demonstrate the accuracy of that label.
Indeed, prior to these actions by the SEC’s Enforcement
Division, the SEC had also issued a significant number of comment
letters to individual reporting companies–mainly investment
entities–concerning their disclosures, specifically inquiring
about greenwashing. Indeed, from July 1, 2021 through March 21,
2023 fully one hundred and sixty-seven (167) reporting entities
received a comment letter concerning greenwashing (of which 86%
were investment entities) without reference to any other
environmental or climate change issue.
(https://www.mintz.com/insights-center/viewpoints/2151/2023-06-07-quantitative-analysis-comment-letters-issued-sec)
That the SEC may now be moving towards an “industry
sweep” or similar enforcement action with respect to ESG
issues and investment funds is consistent with their prior actions,
and appears to be a logical next step in a trend of increasing
enforcement scrutiny of this subject area.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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