Dive Brief:
- The Securities and Exchange Commission charged Invesco Advisers $17.5 million Friday for making misleading statements about how much of the firm’s investments are managed using an ESG strategy.
- The SEC said in a release that for two years, the company’s marketing materials exaggerated the percentage of company-managed funds that integrated ESG factors while making investment decisions.
- The action represents the second multi-million dollar ESG-related fine from the SEC in the past couple weeks. The charge comes shortly after the agency settled with WisdomTree Asset Management for $4 million for falsely advertising the investment strategy of three funds to have incorporated ESG factors.
Dive Insight:
The SEC said in the accompanying Nov. 8 cease-and-desist order that between April 2020 and July 2022, Invesco Advisers had marketing materials that claimed and told its clients that between 70%-94% of its parent company’s funds were managed in a way that integrated environmental, social and governance factors into the investment decision-making process. However, the agency said those percentages were inflated because they included “a substantial amount of assets” that were being held in passive exchange traded funds that “did not consider ESG factors in investment decisions.”
The cease-and-desist order said that by fall 2019, Invesco had an internal analysis done that showed that clients representing “at least $370 billion” in assets under management were at risk of moving to another firm. Believing that integrating ESG considerations “was of commercial importance,” the agency said Invesco accelerated its ESG integration effort after the analysis was done. However, the agency said it found that Invesco lacked “any written policy defining ESG integration.”
“Invesco saw commercial value in claiming that a high percentage of company-wide assets were ESG integrated. But saying it doesn’t make it so,” Sanjay Wadhwa, the acting director of the SEC’s Division of Enforcement, said in the release. “Companies should be straightforward with their clients and investors rather than seeking to capitalize on investing trends and buzzwords.”
The order did not make any allegation or findings based on disclosures of specific funds or investment strategies, and Invesco did not admit or deny the findings as part of the settlement. In an emailed statement sent to ESG Dive Monday, Invesco said it has not issued any public reports about its firmwide ESG integration since “late 2022.”
“We are pleased to resolve this matter related to historical statements made about the percentage of firmwide assets under management that were ESG-integrated,” Invesco said in a statement. “Invesco Advisers, Inc. cooperated fully with the investigation and will continue to take a client-led approach of offering investment strategies tailored to the specific investment objectives of its clients.”
SEC’s settlement with Invesco is the second high-dollar fine the agency has made since it revealed in September it was disbanding its climate and ESG enforcement task force. The latest settlement was announced just days after the SEC Division of Examinations said in a risk alert that it has seen investment companies and advisors mischaracterize their use of ESG factors in their advertising or fund disclosures over the past four years.
