SEC Imposes $17.5 Million Fine Against Investment Adviser for Greenwashing

On November 8, the SEC and an investment advisor entered into a settlement to resolve an administrative proceeding featuring allegations of greenwashing.  Specifically, the investment advisor was alleged to have made “misleading statements concerning the company-wide percentage of assets under management . . . that was ‘ESG integrated,’ [meaning the investment] incorporat[ed] [] environmental, social, and governance considerations into [the] investment decision making processes.”  In other words, the investment advisor claimed to have more funds invested in ESG-focused assets than it actually did.  Notably, to resolve these alleged violations, the investment advisor agreed to pay a $17.5 million penalty. 

This enforcement action is significant for a number of reasons.  First, the mere existence of this enforcement action demonstrates the SEC's continued focus on greenwashing issues even after the disbandment of the SEC's Climate & ESG task force.  Second, the considerable size of the fine indicates an appetite for major enforcement actions in this space.  Third, the nature of the allegations--that an investment adviser made “representations . . . that . . . were overstated” and “failed to adopt and implement reasonably designed policies and procedures”--may illustrate the type of enforcement action that the SEC may bring, irrespective of the upcoming change in administrations.  (Pursuing an enforcement action against an entity for misstatements is a classic task within the remit of the SEC, and does not require that the SEC adopt any particular position on the underlying merits of the issues about which the company chose to disclose.)  In other words, this enforcement action may offer considerable insight into the SEC's playbook for future enforcement actions concerning allegations of greenwashing.