U.S. securities regulator scrutinizes funds over ESG labels -sources

Credit: REUTERS/Andrew Kelly

(Updates sourcing, adds background)

By Chris Prentice

Sept 3 (Reuters) - The U.S. securities regulator has been asking money managers to explain the standards they use for classifying funds as environmental, social and governance (ESG)-focused for several months, according to two sources familiar with the queries.

U.S. Securities and Exchange Commission staff have been pressing firms for details on how they determine these classifications, two sources with direct knowledge said. Earlier this year, the regulator said https://reut.rs/3yHrpLx it had found "potentially misleading" claims and inadequate controls around investing in ESG issues in a review of investment advisors and funds.

SEC examiners have been scrutinizing investment advisers in recent months, including seeking information about how they are dealing with other jurisdictions, one of the sources said of the inquiries, which were reported earlier by Bloomberg News.

The agency did not respond to a request for comment.

Separately, the SEC has deployed a specialized team to examine misconduct related to climate change and other ESG issues. With a record $51 billion flooding into sustainable U.S. funds in 2020 alone, according to Morningstar, investors need to be better informed, the SEC says.

The regulator is probing Deutsche Bank's asset manager over how it used sustainable investing criteria to manage its assets, sources familiar with the investigation said last week.

(Reporting by Noor Zainab Hussain and Chris Prentice; Editing by Shinjini Ganguli and Mark Porter) ((noor.hussain@thomsonreuters.com; Within U.S. +1 646 223 8780; Outside U.S. +91 80 6182 2663 or +91 80 3796 2663 ;)) Keywords: USA FUNDS/ESG (UPDATE 1)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.