Global fintech and funding innovation ecosystem

Regulators target “greenwashed” products susceptible to marketing hype

Investment Executive | James Langton | May 17, 2021

crystal ball earth - Regulators target “greenwashed” products susceptible to marketing hypeThe ESG investing space has become increasingly susceptible to marketing hype

Sustainable investing, like any other hot retail investment trend, is vulnerable to hype. Regulators now are stepping up their efforts to ensure investors are getting what they’re promised from environmental, social and governance (ESG) investments.

When ethical investing was a fringe activity, regulators didn’t have to worry too much about what was going into investment funds that promised green or socially conscious investments. The firms involved in the space were mostly true believers in the cause of responsible investing, and the assets at stake were relatively modest.

However, as ESG investing goes mainstream, it’s become increasingly susceptible to marketing hype designed to drive sales rather than meet investor needs.

See:  The evolution of ESG: Corporate sustainability leaders in the financial services sector are taking on new responsibilities

This danger has not escaped the attention of regulators. In recent weeks, members of the Canadian Securities Administrators (CSA) — including both the Ontario Securities Commission and the British Columbia Securities Commission — have been reviewing fund managers’ ESG activities to ensure that what they’ve stated in their marketing materials matches what’s in their portfolios.

“The CSA is currently doing a sweep on marketing practices of registrants to monitor their compliance with securities laws,” said Ilana Kelemen, senior advisor, communications and stakeholder relations with the CSA. “We further focused the scope of our review of investment fund managers [to concentrate] on the marketing materials for ESG products and services.”

The results of the CSA’s reviews are expected by end of the third quarter, Kelemen said.

Similar concerns about the ESG activities of portfolio managers and investment advisors were the focus of recent compliance work by the U.S. Securities and Exchange Commission (SEC). That regulator uncovered a variety of issues, including “potentially misleading” communications from firms to investors about ESG investing processes and their adherence to global ESG practices.

The SEC also found firms that had inadequate or inconsistent approaches to implementing both positive and negative portfolio screens; had proxy voting that diverged from stated practices; made baseless or misleading performance claims; or had poor internal controls and compliance programs to adhere to the global ESG standards they claimed to be following.

See:  New SEC task force will scrutinize ESG and climate disclosures and marketing

The SEC also found some funds’ portfolios were heavily populated with companies that carried poor ESG scores despite promising investors the opposite.

Time will tell if the CSA turns up similar issues during its compliance reviews, but regulators around the world are paying more attention to investor protection in the growing sustainable investment market.

Continue to the full article --> here


NCFA Jan 2018 resize - Regulators target “greenwashed” products susceptible to marketing hype The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit:

Latest news - Regulators target “greenwashed” products susceptible to marketing hypeFF Logo 400 v3 - Regulators target “greenwashed” products susceptible to marketing hypecommunity social impact - Regulators target “greenwashed” products susceptible to marketing hype

Support NCFA by Following us on Twitter!

NCFA Sign up for our newsletter - Regulators target “greenwashed” products susceptible to marketing hype


Leave a Reply

Your email address will not be published. Required fields are marked *

6 − three =