By Lene Powell, J.D., Brad Rosen, J.D. and Matthew Garza, J.D.
In remarks in May SEC Chair Gensler acknowledged that measures of the size of the environmental, social, and governance (ESG) investment sector vary, then repeated an estimate from industry association US SIF that put the “U.S. sustainable investment universe” at $17.1 trillion. If that measure is even in the ballpark one can begin to understand why, in the face of heavy criticism from the political right and the intense scrutiny of the SEC, the investment management industry is moving aggressively to offer more ESG investment options to the market. The SEC in turn is concerned about exaggerated ESG claims and “greenwashing” from funds and investment advisers, and has also expressed unease about the increasingly large role played by publishers who provide ESG indexes and ratings.
In SEC targets ESG asset managers and fuels critics, our analysts look at the vocal opponents to ESG and examine reactions to two SEC proposals that would require the investment management industry to create a common disclosure framework and tighten the fund name rule. We also examine the responses of ESG index providers to the SEC’s questions about their role in the market and whether they are providing investment advice rather than mere information.