26/05/2022 15:09
The Securities and Exchange Commission (SEC) takes the field to combat “greenwashing”. The American Consob has made clear the precise parameters to regulate the world of ESG products, or “Environmental Social and Governance”, after so many years in which the industry has operated without concrete standards.
The growth of investments labeled sustainable has been exponential in recent years. ESG funds are mutual funds or exchange-traded funds (ETFs) that include companies that claim to achieve goals to reduce climate change, reduce carbon emissions, more corporate governance and social justice. The issuance of these assets rose to $ 1.6 trillion in 2021, with a total market in excess of $ 4 trillion. Bloomberg has estimated that ESG assets will reach at least $ 53 trillion by 2025. Vigorous growth, also linked to the change in the qualification of existing products.
The Securities and Exchange Commission has proposed changes to the rules and reporting forms to promote consistent, comparable and reliable information for investors about the incorporation of environmental, social and governance (ESG) factors by funds and advisors. The proposed changes would apply to certain registered investment advisors, exempt advisors, registered investment companies and business development companies.
“I am delighted to support this proposal because, if adopted, it would establish disclosure requirements for funds and advisors that market themselves as having an ESG focus”said the SEC president Gary Gensler. “ESG encompasses a wide variety of investments and strategies. I think investors should be able to dig deeper to see what’s under the hood of these strategies. This comes to the heart of the SEC’s mission to protect investors by enabling them to allocate their capital efficiently and meet their needs. “
The proposals of the SEC
They have been done in detail two concrete proposals to regulate the green investment industry.
The first proposal would bring the funds back into the Names rule ,which for about twenty years has required investment instruments that refer to a specific industry, geography or type in the name, to consequently invest at least 80% of their assets.
Soon even funds with “Esg” in the name, or similar declinations, will have to comply. Specularly, all funds that integrate ESG factors among other investment policies “they will not be able to use the ESG definition in their names “.
The second proposal, similar to those introduced in Europe by the SFDR directive, it will require funds invested according to ESG criteria to provide more information on the strategy, and on the measurement of their objectives in the three sectors environment, governance and social. For those specializing in environmental sustainability, information on the carbon dioxide emissions of the companies in their portfolio will be provided.
“Under the proposal, a fund that considers ESG factors alongside but not more centrally than other non-ESG factors in its investment decisions would not be allowed to use ESG or similar terminology in its name – he comments. Donato Calace of Datamaran, an IT monitoring company for ESG risks -. This would be materially defined deceptive or misleading. For such “matching funds”, ESG factors are generally no more significant than other factors in the investment selection process, so ESG factors may not be decisive in deciding to include or exclude a particular investment in the portfolio.
“The operators who have been saying for some time: let’s look at the Europe of ESG investments to understand what will happen in the US, they were not completely wrong – adds Calace – . The Names rule is not articulated like the EU taxonomy on investments, but it implies a first legal definition for the sustainability criteria. If a fund with an ESG name has to invest 80% of its assets according to ESG criteria, I need to know what that means, or I won’t be able to check if it is operating correctly “.
The new proposal, as reported by the Financial Times, it should be put to a vote next Wednesday.