Fund manager, Purpose Investments Inc., and its founder, Som Seif, have been accused of greenwashing by the Ontario Securities Commission (OSC) — they are fighting the allegations.
The OSC filed an enforcement case against the fund firm Friday, alleging the it breached securities rules by overstating how deeply it considered environmental, social and governance (ESG) factors, and used ESG data, in making investment decisions at its funds.
The regulator alleged that, contrary to claims made in the firm’s sales communications — including in online posts, interviews and articles — the firm wasn’t considering ESG factors for many of its funds.
“In reality, Purpose did not consider ESG in making investment decisions for many of the funds it managed. Purpose did not implement any formal policy and did not have documented procedures relating to the consideration of ESG by its portfolio management team for funds managed by Purpose; instead, consideration of ESG at Purpose… was ad hoc,” it alleged.
It also alleged that the firm made statements about its reliance on ESG in its sales communications that conflicted with the disclosure made in regulatory filings, such as fund prospectuses.
According to the allegations, in internal communications executives at the firm stated, “their intention to market Purpose as considering ESG, and their belief that having ESG considerations would be helpful for improving sales and for marketing.”
In March 2023, Purpose issued a press release announcing changes to its website, and clarifying its approach to ESG in its investment decision-making. That action followed a review by the OSC, which saw the firm tell the regulator that only about a third of its funds could be classified as ESG funds, based on their consideration of ESG factors.
In addition to the allegations against the firm, the OSC also alleged that Seif breached the rules too.
None of the allegations have been proven.
In a statement, Purpose said that it, “will vigorously contest” the regulator’s enforcement action, and it questioned the regulator’s decision to bring the case in the first place.
“We are struggling to understand how the OSC is seeing this as a topic for enforcement action against Purpose, and even more specifically against me,” Seif said in a statement. “The OSC is not alleging investor harm or prospectus violations, nor is this case based on investor complaints during the period in question about the way our vision was delivered. Frankly, we believe this process is not supported by the facts.”
The company said that it believes that the regulator’s allegations amount to concerns about, “interpretive questions about evolving ESG standards rather than any substantive breach.”
And, it said that it aims to use the hearing before the Capital Markets Tribunal to, “show how its ESG integration methodology was developed transparently and in good faith to benefit Canadian investors.”
“We look forward to presenting our perspective through the appropriate channels and demonstrating that our approach was both innovative and appropriate,” Seif said.
An initial hearing in the case is slated for Oct. 6.