By Charlie Conchie
The world’s biggest asset manager BlackRock has warned a US watchdog that planned rules to clampdown on “greenwashing” risk confusing investors and could force firms to disclose company information publicly.
The Securities and Exchange Commission (SEC) is currently drawing up plans with the aim of stamping out unfounded environmental, social and corporate governance (ESG) claims made by firms to lure in investors, with the rules intended to create more standardisation around ESG disclosures.
But BlackRock said last week in a letter to the regulator that proposals risked befuddling investors and forcing firms to disclose company information.
“The proposed requirements would increase the potential for greenwashing and lead to investor confusion,” BlackRock wrote in its letter.
“The granular nature of requirements will inevitably lead to the disclosure of proprietary information about these strategies, reducing the competitive advantage of those unique insights.”
The investor acknowledged the need to boost oversight, but has questioned the SEC’s demand for more details on how funds should categorise strategies and describe their ESG impact. BlackRock argues the details could mislead investors about how much ESG really matters when managers pick stocks and bonds.
The Managed Funds Association said it also supported the SEC’s goal to promote better disclosure, but the nature of the plans could result in unnecessary detail on “incidental” areas and “undue emphasis on an otherwise immaterial strategy”.
The move from the SEC to clampdown comes amid a global push to clampdown on the use of the ‘ESG’ label, amid concerns that firms have been exploiting it to scoop up easy cash from investors.
In the UK, the FCA has also backed plans to bring ESG ratings and labelling within its remit and pushed for greater international standardisation.
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