The SEC found that from 2020 to 2022, the New York-based firm marketed funds as environmentally responsible while still investing in companies linked to fossil fuels and tobacco.
This case highlights ongoing SEC efforts to curb “greenwashing” in the investment sector.
Washington, D.C.: Investment adviser WisdomTree Asset Management, based in New York, has agreed to pay $4 million to resolve charges from the U.S. Securities and Exchange Commission (SEC) for allegedly misleading investors by branding three of its funds as following an environmental, social, and governance (ESG) strategy.
Key Takeaways
The SECโs settlement with WisdomTree underscores its continued efforts to combat “greenwashing”โa practice where investment firms market funds as ESG-focused to attract investors, even if these funds invest in sectors they claim to exclude, such as fossil fuels.
Case Background
From March 2020 to November 2022, WisdomTree marketed three exchange-traded funds (ETFs) as excluding fossil fuel and tobacco companies. However, the SEC’s investigation revealed that these funds actually included investments in companies linked to coal mining, natural gas extraction and distribution, and tobacco product retail. According to the SEC, WisdomTree relied on data from third-party vendors that did not completely screen out all companies associated with fossil fuel and tobacco industries and lacked internal policies to ensure such exclusions.
Settlement Details
Without admitting or denying the findings, WisdomTree agreed to a cease-and-desist order, a censure, and a $4 million civil penalty. A spokesperson for WisdomTree noted that the implicated funds were small and have since been liquidated. The company stated, โWe take our regulatory and compliance responsibilities very seriously. We are proud of our investment track record and our transparency with investors.โ
(October 21, 2024)
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