In a meeting of the SEC Asset Management Advisory Committee ("AMAC"), SEC Chair Gary Gensler questioned the basis for marketing claims that a fund is "green" or "sustainable."

In his remarks, Mr. Gensler emphasized the need for greater transparency into the basis for claims that a fund is "green" or "sustainable," noting that he had requested that SEC staff consider whether fund managers should be required to disclose the criteria and underlying data they use to support their claims, as well as updates to fund-naming conventions.

Mr. Gensler also raised issues related to the increased use of third-party service providers that offer sustainability ratings. He questioned (i) the data underpinning assertions made by these providers, (ii) whether their services constitute investment advice and (iii) what advisers' responsibilities are with regard to their use of such services.

At the AMAC meeting, Commissioner Hester Peirce urged consideration of the differences between financial reporting and environmental, social and governance ("ESG") reporting. She argued that, unlike financial reporting, ESG standard-setting is fluid, and covers a wide variety of issues that may not be "objectively quantifiable and comparable across issuers." With respect to the use of third-party standard-setters for ESG disclosure, Ms. Peirce urged the AMAC to consider whether entrusting such standard-setters with this responsibility raises financial and regulatory concerns.

Ms. Peirce also suggested that the AMAC consider whether or not government-mandated diversity classifications for the asset management industry are beneficial.

Primary Sources

  1. SEC Press Release: SEC Issues Agenda for July 7 Meeting of Asset Management Advisory Committee
  2. SEC Statement, Gary Gensler: Prepared Remarks before the Asset Management Advisory Committee
  3. SEC Statement, Hester M. Peirce: Remarks at Asset Management Advisory Committee Meeting
  4. SEC Statement, Caroline A. Crenshaw: Remarks at Asset Management Advisory Committee Meeting

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