BlackRock Says New ESG Rule Could Affect Investors
BlackRock Inc, the world's largest asset manager, warned the US Securities and Exchange Commission (SEC) this week that its proposed measures to combat 'greenwashing' by fund managers could mislead investors.
BlackRock made the allegations in a letter submitted in response to an SEC proposal in May to prohibit funds from making baseless claims about their environmental, social, and corporate governance (ESG) credentials. The measures also seek to increase consistency in ESG disclosures.
Regulators and campaigners are concerned that US funds seeking to capitalise on the popularity of ESG investing may be deceiving shareholders about their ESG credentials.
While acknowledging the need for increased monitoring, BlackRock questioned the SEC's need for more details on how funds should categorise strategies and describe their ESG impact, noting that such details could mislead investors about how much ESG matters when managers choose stocks and bonds.
"The proposed requirements would increase the potential for greenwashing and lead to investor confusion," BlackRock said in the letter.
"The granular nature of requirements will inevitably lead to the disclosure of proprietary information about these strategies, reducing the competitive advantage of those unique insights."
The SEC's plan also defines how ESG funds should be marketed and how investment advisors should explain their reasoning when labelling a fund.
While SEC Chair Gary Gensler stated in a May statement that the measures are in response to increased investor demand for such information, industry groups caution that the agency's goal of standardising ESG labels may limit investor choice.
The Managed Funds Association stated that it agreed with the SEC's goal to promote better transparency but had concerns.
"Requiring an adviser to provide extensive disclosures concerning how it integrates ESG factors—no matter how incidental the consideration may be...—will result in undue emphasis on an otherwise immaterial strategy," the group said.
Source: Money Control