Invesco Advisors has agreed to pay $17.5m to settle an SEC complaint that alleged the company misled investors about how much of its assets under management factored in environmental, social and governance (ESG) factors in investment decisions.

From 2020 to 2022, the firm told clients that between 70% and 94% of parent company Invesco Ltd’s assets under management were “ESG-integrated,” the agency alleged. In a 2020 presentation to a large wealth management firm, Invesco Advisers mentioned “Our Commitment to ESG” and called itself a “Trusted Partner in Responsible Investment,” according to the SEC’s order. 

Disclosures and reality

But the regulator alleged that a “substantial” amount of assets were held in passive exchange-traded funds that didn’t consider ESG factors, and the SEC claimed Invesco Advisers lacked any written policy on what ESG integration meant.

Invesco was worried it would lose investors if it didn’t communicate how it handled ESG concerns in investing, the SEC’s settlement order said.

“Invesco saw commercial value in claiming that a high percentage of company-wide assets were ESG integrated. But saying it doesn’t make it so,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement. “Companies should be straightforward with their clients and investors rather than seeking to capitalize on investing trends and buzzwords.”

Invesco Advisers didn’t admit to or deny the SEC’s allegations.

“Invesco Advisers Inc cooperated fully with the investigation and will continue to take a client-led approach of offering investment strategies tailored to the specific investment objectives of its clients,” Andrea Raphael, a spokeswoman for Invesco, said in a statement. Raphael said the agency’s order “makes no allegations or findings related to disclosures about specific funds or investment strategies.”

The SEC charged Invesco with willfully violating SEC Rule 206(4)-1(a)(5) which makes transgression a fraudulent, deceptive, or manipulative act, practice, or course of business.

Prior cases, efforts

Last month, WisdomTree paid $4m to settle a similar SEC investigation that found three ESG funds invested in stocks tied to fossil fuels and tobacco. WisdomTree had told clients its ESG funds wouldn’t own shares tied to those industries, the SEC said.

And, amid greenwashing scrutiny, regulatory enforcement and lawsuits, other solutions have been explored. Last year, Vodafone Group and Nestlé started setting up panels of experts to doublecheck environmental claims before they appear on products and marketing in an effort to avoid allegations of greenwashing.