Invesco Advisors has been fined $17.5 million for misleading investors about the level of ESG assets in its exchange-traded funds, the Securities and Exchange Commission announced.
From April 2020 to July 2022, the company claimed that its “ESG integrated” assets ranged from 70% to 94% when in fact a "substantial amount" of the assets were in ETFs that did not consider ESF factors in their investment decisions, the SEC said today. Also, the firm had no written policies for determining that percentage, the regulator said.
The penalty was part of a settlement in which the company neither admitted to nor denied the allegations, the SEC said.
“These percentages counted Invesco’s passive ETFs, which contained a substantial portion of Invesco’s AUM, as ESG integrated, which was misleading as many of the ETFs could not consider ESG factors in making investment decisions because they were passive strategies that did not follow an ESG-related index,” the SEC said in its order. “This included Invesco’s largest ETF, the Invesco QQQ Trust—an index product designed to track the 100 largest non-financial companies traded on the Nasdaq exchange.”
Invesco misreported the ESG data in presentations to board directors of funds it advised, in proposals to prospective clients, and in marketing materials, the order said.
Invesco issue the following statement in regards to the matter: “We are pleased to resolve this matter related to historical statements made about the percentage of firmwide assets under management that were ESG-integrated. The SEC Order makes no allegations or findings related to disclosures about specific funds or investment strategies. Invesco has not issued public reports of firmwide ESG integration levels since late 2022. 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.”
The company's ESG push came from a belief that incorporating ESG concerns into portfolio management was “of commercial importance” globally, the SEC said. An internal audit had indicated that some $370 billion in client assets were “at risk” of being moved to firms with more proactive ESG integration, the order said.
In 2020, Invesco ramped up its promotion of its ESG integration efforts in overall strategies and individual investments, and claimed that the “percentage of AUM that was ESG integrated varied from 70% to 94% during the relevant period,” the order said.
The order said that Invesco had no written policies for determining the level of ESG integration, and at times the level was based on an analysis of an investment team's general ESG integration approach rather than an analysis at the fund or strategy level.
Invesco was censured and ordered to pay $17.5 million in a civil penalty, in addition to being ordered to cease and desist.
Invesco has more than 37,000 customers and about $746 billion in AUM. It also has more than 450 pooled investment vehicles that hold another $580 billion in AUM .