business news in context, analysis with attitude

The Wall Street Journal reports that "regulators proposed new disclosure and naming requirements for investment funds that tap into public angst regarding climate change or social justice, in an effort to address concerns about 'greenwashing' by asset managers seeking higher fees.

"The Securities and Exchange Commission voted Wednesday to issue two proposals that aim to give investors more information about mutual funds, exchange-traded funds and similar vehicles that take into account ESG - or environmental, social and corporate-governance - factors. One of the proposed rules, if adopted, would broaden the SEC’s rules governing fund names, while the other would increase disclosure requirements for funds with an ESG focus.

"The financial industry is split - between asset managers and those who buy their products - on the need for more SEC oversight of ESG funds. The Investment Company Institute, which lobbies Washington on behalf of asset managers, said it planned to review the proposals with its members closely but had a number of concerns, including about costs that it said investors will ultimately bear."

The Journal goes on:  "The boom in what advocates call green, or sustainable, investing has posed a growing challenge to regulators in recent years. Assets in funds that claim to focus on sustainability or ESG factors reached $2.78 trillion in the first quarter, up from less than $1 trillion two years earlier."

KC's View:

I think that if companies or funds claim an ESG focus, they ought to be held toi account … and the best way is to require them to be utterly transparent about what they're doing.  And, even more importantly, not doing.

Frankly, the system would be better off if there were some sort of common monitoring system that could lay everything out in an apples-to-apples way, so one could compare what companies are doing in an effective, easy to understand way.  

But stronger regulation is a good first step.