Investment management firm Invesco Advisers Inc. agreed to pay a $17.5 million fine after the US Securities and Exchange Commission alleged it misleadingly claimed the integration of environmental, social, and governance factors across its assets under management. According to an order issued by the SEC on Friday, Invesco Advisers allegedly made false statements about the extent of ESG integration across its investments, in what the regulator called a move that could be considered misleading to clients who prioritize values in their investment decisions.
The investigation revealed that between 2020 and 2022, Invesco Advisers styled itself as the industry leader in ESG integration, claiming that between 70% and 94% of its parent company’s AUM was “ESG integrated.” According to the SEC, this created a false impression about Invesco’s ESG investment approach. For example, in a 2020 presentation to a large wealth management firm, Invesco Advisers branded itself as “A Trusted Partner in Responsible Investment” and kept “Our Commitment to ESG” as one of its value propositions, the SEC’s order cited.
But results from the SEC show that a significant portion of Invesco’s funds were invested in passive exchange traded funds that did not, therefore, ‘actively’ account for the ESG factors, contrary to what this company claimed in the public about it having a statement of comprehensive ESG integration. Additionally, the SEC said that Invesco Advisers did not have any published, written policy that defines or standardizes the integration of ESG, making its firm’s practices transparent and consistent on such matters.
Companies should be transparent with their clients and investors instead of trying to profit from investing trends and buzzwords, Sanjay Wadhwa, an acting director of the SEC’s Division of Enforcement, said in a statement. The statement captures part of the larger effort by the SEC to compel investment firms to stand accountable for “greenwashing” or overstating their commitment toward sustainable and responsible investment standards. This is coming as regulators continue intensifying an crackdown on businesses that are exploiting the growing demand for ESG themes without having evidence for these themes.
Invesco Advisers neither admitted nor denied the findings by the SEC but cooperated fully with investigations. Invesco Spokesperson, Andrea Raphael, said the firm is committed to a client-led approach through propositions that “serve our clients’ goals”. Raphael notes that the SEC order does not reveal that particular funds or even investment strategies failed to meet expectations in ESG. Meaning, therefore, that the findings were company-wide and not issues with specific investment offerings by the companies.
This is the latest in a series of SEC actions related to alleged ESG misrepresentations. In October, the agency fined WisdomTree Asset Management Inc. $4 million for promising it would offer exchange-traded funds that excluded fossil fuels and tobacco, which the SEC claimed it hadn’t.
The SEC’s case against Invesco forms part of its wider scrutiny of ESG-related disclosures across the financial sector. As ESG investing grows more popular among both individual and institutional investors, regulatory bodies are clamping down on how firms claim to be measured in order to ensure clients get an accurate view of the sustainable attributes underpinning their investments. The SEC’s moves highlight an emphasis on transparency even as more investors are driven by the desire to serve with a social conscience, not to mention a financial one.
To Invesco and other asset managers, the fine ordered by the SEC sends a message that clear and standardized definitions and practices must be developed in advertising the integration of ESG, particularly when the level of demand for sustainability-focused investments increases. As the SEC implements this action, it reiterates investment firms should leave ESG “buzzwords” behind and instead give a proper honest expression of the scope and nature of their commitment to ESG.