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SEC Proposes to Combat ESG Greenwashing, Hester Pierce Opposes

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SEC Proposes to Combat ESG Greenwashing Hester Pierce Opposes
27
May
  • The US Securities and Exchange Commission proposed new rules on ESG methods and strategies.
  • SEC voted to instruct RIA’s touting ESG strategies to provide more rigorous Form ADV disclosures.
  • Commissioner Hester Pierce argues the US ‘dropped the ball’ on crypto regulation.

The US Securities and Exchange Commission (SEC) proposed new federal rules on environmental, social, and governance (ESG) disclosure obligations to “separate the wheat from the chaff” in an attempt to combat the malpractice of ‘greenwashing’

Yesterday the SEC panel voted 3:1 in favor of the proposed rule. Commissioner Hester Pierce was the only dissenting voter. With this change imposed in the system, the funds and Registered Investment Advisors (RIA) would be required to provide more detailed disclosure on ESG strategies and methodology in annual reports, fund prospectuses, and advisor disclosure documents like Form ADVs

The disclosures would help clients easily comprehend the approach an advisor uses to invest, “as well as compare the variety of emerging approaches, such as employment of an inclusionary or exclusionary screen, focus on a specific impact, or engagement with issuers to achieve ESG goals,” the proposal stated.

‘Crypto-Mom’ Is Concerned About the ‘Knock-on Effects’

In an interview with CNBC, SEC Commissioner Hester Pierce, aka, the ‘crypto mom’ argued that the proposal is ambiguous and will be challenging to enforce. She expressed concern that the US has dropped the ball on the regulations of cryptocurrencies.

While addressing DC Blockchain Summit, Pierce began by mentioning the high probability of scams in the crypto space since it’s a ‘hot area at the moment.’

However, she emphasized the ‘knock-on effects’ of the failure of these new rules ‘keeps her up at night’ by opining: “We are not allowing innovation to develop and experimentation to happen in a healthy way and there are long term consequences of that failure.”

Yet, while enforcement proceedings of this sort illustrate the problem, they also show that we already have a solution; when we see advisers that do not accurately characterize their ESG practices, we can enforce the laws and rules that already apply.

“A new rule to address greenwashing, therefore, should not be a high priority” She added.

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