ESG liars? SEC investigating misleading sustainability claims from investment funds

SIMONE DEL ROSARIO: TODAY I’M GOING TO TAKE YOU BACK TO ONE OF MY FIRST STORIES AT STRAIGHT ARROW NEWS – ON E-S-G INVESTING. THIS IS A REALLY BURGEONING SPACE IN INVESTING WHERE YOU PUT YOUR MONEY WHERE YOUR MOUTH IS. SO IF YOU REALLY CARE ABOUT ENVIRONMENTAL ISSUES – INVESTING IN COMPANIES THAT REFLECT THAT VALUE. 

E-S-G ACTUALLY STANDS FOR ENVIRONMENTAL, SOCIAL, GOVERNANCE – HOW A COMPANY TREATS THE ENVIRONMENT, WE TOUCHED ON THAT. HOW A COMPANY TREATS ITS PEOPLE, AND HOW RESPONSIBLY THE COMPANY IS RUN AND WHAT KIND OF DIVERSITY DO THEY HAVE ON THE BOARD OR IN THE C-SUITE.

THE PROBLEM WITH E-S-G – AND IT WAS A CLEAR PROBLEM ALREADY WHEN I DID THIS STORY LAST YEAR, IS THAT THERE’S NO SET CRITERIA TO BE LABELED AN E-S-G FUND.

SO THERE ARE TONS OF FUNDS OUT THERE THAT CLAIM TO BE E-S-G – AND WILL GLADLY TAKE YOUR MONEY – WHICH YOU THINK IS GOING TO COMPANIES THAT REFLECT YOUR VALUES – BUT IT MIGHT BE A LIE.

AND NOW THERE’S A NEW STUDY THAT CAME OUT THIS MONTH THAT SUPPORTS WHAT WE SUSPECTED – IT’S THE WILD WEST OUT THERE. 

THE SHAREHOLDER ADVOCACY NONPROFIT “AS YOU SOW” TEAMED UP WITH U-C-S-D RESEARCHERS TO LOOK AT WHETHER E-S-G FUNDS ARE “GREENWASHING” – THAT IS – CLAIMING WITHOUT SUBSTANCE THAT THEY’RE ENVIRONMENTALLY FRIENDLY. 

THE STUDY REVEALED 60 OF THE 94 E-S-G FUNDS THEY ANALYZED – TWO THIRDS – FAILED TO CLOSELY ADHERE TO E-S-G PRINCIPLES.

AND THEY BROUGHT THOSE FINDINGS STRAIGHT TO THE S-E-C.

THE BOTTOM LINE – IS THESE RESEARCHERS ARE ASKING THE S-E-C TO STEP UP AND CREATE A CONCRETE DEFINITION FOR E-S-G SO INVESTORS AREN’T FOOLED. AND THAT’S SOMETHING I SPOKE ABOUT WITH MY EXPERT IN MY REPORT MONTHS AGO.

KIMBERLY GRIEGO-KIEL: If each individual creates a definition and puts that in their documents, then they also have to follow through with that. So does the SEC want to have a broad definition that everyone follows to make it easier for them? Or does everyone get to decide their own definition?

SIMONE DEL ROSARIO: WHILE OVERSIGHT USUALLY LAGS BEHIND TRENDS, WE DO KNOW THIS ADVOCACY GROUP MET WITH THE S-E-C THIS MONTH – AND THAT FOR SOME MONTHS – THE S-E-C HAS BEEN INVESTIGATING MISLEADING SUSTAINABILITY CLAIMS.

THAT’S ALL FOR NOW FROM NEW YORK! 

YOU CAN CHECK OUT MY STORY ON E-S-G INVESTING BY JUST SEARCHING E-S-G ON STRAIGHT ARROW NEWS DOT COM.

I’M SIMONE DEL ROSARIO AND IT’S JUST BUSINESS.