New federal rules released Wednesday could help ensure that investment funds labeled as environment, social and governance (ESG) actually deserve the name — and the high fees they command, The Hill reported. The Security and Exchange Commission (SEC) proposed a new regulation to combat the practice of “greenwashing,” the misleading marketing of unsustainable investments under the ESG label. If adopted, the measure would require funds marketing themselves as ESG-focused to disclose additional information to investors. Different categories of funds would be required to report varied information. Those that are focused on considering environmental factors would be required to share the climate contributions associated with their investments and those that claim to have certain impacts would need to summarize their progress. “The lack of specific disclosure requirements tailored to ESG investing creates the risk that funds and advisers marketing such strategies may exaggerate their ESG practices or the extent to which their investment products or services take into account ESG factors,” it said.
