US regulators are expanding their crackdown on misleading labels of investment products with a probe focused on whether managers of funds that are marketed as sustainable are trading away their right to vote on environmental, social and governance issues.
For the past several months, Securities and Exchange Commission enforcement lawyers have been peppering firms offering ESG funds with queries, including how they lend out their shares and whether they recall them before corporate elections, according to four people with knowledge of the matter. The practice lets asset managers earn fees that benefit investors, but it can also impact the ability to cast ballots.
The SEC’s investigation delves into whether asset managers are making the proper disclosures to investors, said the people, who asked not to be named because the queries are private. It drives at the heart of whether ESG investment funds are able to meet their promise of helping combat societal ills through long-term investments in certain companies, especially if shares they lend out wind up with short-sellers taking an opposing view.
The full article is available at https://www.bloomberg.com/news/articles/2022-08-15/esg-funds-face-us-probe-over-ceding-their-votes-on-social-issues#xj4y7vzkg