US Securities Regulators Working on Proposals to Fight "Greenwashing"
US securities regulators released a new regulation yesterday to tighten disclosure rules for the growing number of investments that tout their adherence to environmental, social, and governance (ESG) principles.
The Securities and Exchange Commission said the regulation was intended to standardise disclosure and avoid circumstances where a fund "may overstate its real consideration of ESG variables" to combat "greenwashing" when financial investments fall short of marketing statements.
SEC Chairman Gary Gensler said:
"When an investor reads current disclosures, though, it can be very difficult to understand what some funds mean when they say they're an ESG fund. There is also a risk that funds and investment advisers mislead investors by overstating their ESG focus."
According to the SEC, funds that combine ESG considerations with non-ESG variables would be required to disclose how ESG is incorporated into the investment process, and ESG impact funds to disclose how they monitor progress.
Environmentally conscious funds would be required to reveal their investments' carbon footprint.
SEC Commissioner Hester Peirce, a Republican, spoke out against the proposal, saying that while she supported the notion of tighter standards, the proposed rules did not fully define ESG. The SEC intends to have a 60-day public comment period on the proposal.
Source: Channel News Asia