The Securities and Exchange Commission announced it has charged Invesco Advisers, Inc. with misleading clients about the share of company-wide assets it managed that integrated environmental, social and governance (ESG) factors into investment decisions.
Invesco, a registered investment adviser, based in Atlanta, agreed to pay a $17.5 million civil penalty to settle the SEC’s charges.
The commission determined that from 2020 to 2022, Invesco told clients and stated in marketing materials that between 70 and 94 percent of its parent company’s assets under management were “ESG integrated.”
But according to the SEC, these percentages included a substantial amount of assets that were held in passive ETFs that did not take ESG factors into account when it came to investment decisions. It was also alleged that Invesco lacked any written policy defining ESG integration.
“As stated in the order, 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,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement. “Companies should be straightforward with their clients and investors rather than seeking to capitalize on investing trends and buzzwords.”
Invesco was found to be in violation of the Investment Advisers Act of 1940. The firm did not admit or deny the findings, but agreed to cease and desist from violations of the charged provisions, be censured, and pay the $17.5 million civil penalty.
The charges come several weeks after New York-based investment WisdomTree Asset Management Inc. adviser was charged with failing to adhere to its own investment criteria for environmental, social and governance-market funds. The SEC said that the firm misleadingly marketed three funds as having an ESG investment strategy.
In Sept. 2023, the SEC adopted a new rule cracking down on these types of practices, known as “greenwashing.” The rule targeted misleading marketing practices by investment funds whose names do not accurately reflect its investments or strategies. 80% of a fund’s portfolio is now required to match the asset advertised by its name.
“A fund’s investment portfolio should match a fund’s advertised investment focus,” SEC chair Gary Gensler said at the time. “Such truth in advertising promotes fund integrity on behalf of fund investors.”
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