The U.S. Securities and Exchange Commission announced charges against the global asset management firm Invesco for making false statements about the percentage of assets under its management incorporating ESG-related investing. Charges against Invesco state that the firm overstated the percentage of ESG-related factors considered in investment decisions by the assets it managed. To settle these charges, Invesco will pay a $17.5 million penalty neither admitting nor denying the SEC’s allegations.
That involved material inaccuracies in Invesco’s ESG representations during 2020 and 2022 when the company said that 70 percent to 94 percent of its parent company’s assets under management were “ESG integrated.” However, exchange-traded funds in passive investments for which that figure included did not actually consider ESG factors in their investment decisions. This inclusion of passive ETFs, the SEC said, inflated the appearance of ESG integration within Invesco’s portfolio. Additionally, the SEC also stated that Invesco did not have a written policy that defined what was meant by ESG integration, thus it is unclear what the firm is committed to in terms of ESG practices.
This is one in a string of cases where the SEC has actively pursued asset managers on ESG-related claims. As recently as last month, the SEC took action against ETF provider WisdomTree, charging the firm after it determined that those funds it said embraced ESG considerations did not meet its own standards. WisdomTree settled a $4 million claim over the dispute, which focused on investments in fossil fuels and tobacco operations—industries generally excluded from funds touting ESG compliance.
Sanjay Wadhwa, the Acting Director of the SEC’s Division of Enforcement, countered this case with the importance of authenticity of ESG disclosure and how Invesco appeared to be profiteering from high percentages of ESG-integrated assets without any proof. “Saying it doesn’t make it so,” said Wadhwa, referring to how the SEC believes companies ought to speak clearly and transparently with investors and not hide behind jargon such as ESG to reap commercial benefits.
Invesco said it was “pleased to resolve” the matter related to its past claims about the firmwide percentage of ESG-integrated assets. The firm stated that the order by the SEC did not contain allegations related to specific funds or investment strategies and Invesco hasn’t released reports detailing firm-wide ESG integration levels since late 2022. Invesco also said it has cooperated fully with the SEC’s investigation and remains committed to providing investment strategies aligned with clients’ specific objectives.
Again, a milestone in this case is that it sets out the heightened intent of the SEC to ensure truthful ESG disclosures: it marks a trend toward greater accountability and more clarity within the sustainable investment sector.