(Reuters) — BlackRock Inc., the world’s largest asset manager, warned the U.S. Securities and Exchange Commission this week that its proposed rules aimed at combating “greenwashing” by fund managers will confuse investors.
BlackRock made the claims in a letter filed this week in response to an SEC May proposal to eliminate unsubstantiated claims made by funds about their environmental, social and corporate governance records. The rules also aim to create more standardization around ESG disclosures.
Regulators and activists have grown concerned that US funds looking to cash in on the popularity of ESG investing could mislead shareholders about their ESG credentials.
While BlackRock acknowledged the need to increase oversight, it questioned the SEC̵7;s demand for more detail on how funds should categorize strategies and describe their ESG impact, arguing that such detail 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 these unique insights.”
It is also about how the SEC’s proposal describes how ESG funds should be marketed and how investment advisers should disclose their reasoning when labeling a fund.
While SEC Chairman Gary Gensler said in a statement in May that the measures respond to growing investor demand for such details, industry groups warn that the agency’s goal of standardizing ESG labels could reduce investor choice.
The Managed Funds Association said it also supported the SEC’s goal of promoting better disclosure, but with concerns.
“Requiring an adviser to provide comprehensive disclosures about how it integrates ESG factors — no matter how casual the consideration may be… — will result in undue emphasis on an otherwise intangible strategy,” the group said.