BlackRock Warns SEC New ESG Rule Could Hurt Investors

BlackRock says the SEC's proposed rules aimed at fighting "greenwashing" by fund managers will confuse investors.

The world’s largest asset manager BlackRock Inc. warned the U.S. Securities and Exchange Commission (SEC) in August that its proposed rules aimed at fighting “greenwashing” by fund managers will confuse investors.

BlackRock made the claims in a letter filed this week in response to a SEC May proposal to stamp out unfounded claims by funds about their environmental, social and corporate governance (ESG) credentials. The rules also aim to create more standardization around ESG disclosures.

Regulators and activists have become concerned that U.S. funds looking to cash in on the popularity of ESG investing may be misleading shareholders over their ESG credentials.

While BlackRock acknowledged the need to boost oversight, it questioned the SEC’s demand for more details on how funds should categorize strategies and describe their ESG impact, arguing such details could mislead investors about how much ESG really matters when managers pick stocks and bonds.

“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.”

Marketing and disclosure concerns

Also at issue is how the SEC’s proposal outlines how ESG funds should be marketed and how investment advisors should disclose their reasoning when labeling a fund.

While SEC Chair Gary Gensler said in a May statement the measures respond to growing investor demand for such details, industry groups warn the agency’s aim to standardize ESG labels could reduce investor choice.

The Managed Funds Association said it also supported the SEC’s goal to promote better disclosure, but with concerns.

“Requiring an adviser to provide extensive disclosures concerning how it integrates ESG factors — no matter how incidental the consideration may be… — will result in undue emphasis on an otherwise immaterial strategy,” the group said.

This article was provided by Reuters.

Latest news

Why Inflation Might Be Harder on Rural Clients

The problem with the U.S. inflation rate is that ignores a sizable chunk of the country — rural America, say two researchers.

U.S. States Challenge Biden Rule on ESG Investing

A coalition of 25 U.S. states filed a lawsuit seeking to strike down a Biden administration rule allowing retirement plans to consider ESG factors.

One Product Powers Annuity Sales to New Records

Total annuity sales surged to $310.6 billion last year, a 22% increase from 2021 results and 17% higher than the record set in 2008.

Wealth Taxes Have Unexpected Consequences

A new paper finds they encourage companies to raise dividends so executives have the funds to cover wealth taxes.

Advisor Clients More Nervous About Financial Futures, Survey Finds

They are more likely to say they will continue to work and are less confident about their financial futures, a Nationwide survey finds.

WalletHub Release 2023 Best and Worst States to Retire

The ranking looked at 47 metrics related to affordability, quality of life and health care.