SEC Charges Asset Manager for Greenwashing, and More

September 29, 2023

The top five climate risk and disclosure stories this week.

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SEC fines asset manager after greenwashing probe

DWS, a Deutsche Bank-controlled asset manager, will pay US$19mn to settle charges with the US Securities and Exchange Commission (SEC) over allegedly misleading environmental, social, and governance (ESG) investment disclosures.

The SEC accused DWS Investment Management Americas (DIMA) of providing “materially misleading statements” on its ESG controls and failing to implement certain aspects of its global ESG integration policy between August 2018 and late 2021. Although DWS claimed ESG was integrated into its core principles, the SEC’s order found its investment professionals did not adhere to the marketed ESG investment processes.

“Whether advertising how they incorporate ESG factors into investment recommendations or making any other representation that is material to investors, investment advisers must ensure that their actions conform to their words,” said Sanjay Wadhwa, the head of the SEC’s Climate and ESG Task Force.

The settlement follows a two-year investigation conducted by US and German authorities, which included raids on the DWS and Deutsche Bank offices in May 2021. Responding to the charges, a DWS spokesperson told Responsible Investor that the order acknowledges there was no intent to defraud through its disclosures and that the firm has already taken measures to address the issues.

UK regulator charges Exxon pension over climate reporting fail

UK retirement savings watchdog The Pensions Regulator (TPR) charged the ExxonMobil Pension Plan £5,000 (US$6,127) for failing to publish a report on its management and governance of climate-related risks and opportunities. It’s the first time that TPR has fined a company under its climate reporting regulations.

The scheme’s trustees said they produced the climate report on deadline, but it was not published due to an administrative error. Pension schemes subject to the 2021 regulations must publish climate change reports aligned with the Task Force on Climate-related Financial Disclosures (TCFD) on a publicly available website by a specific deadline .

TPR conducted an investigation into the publication of all climate change reports from pension schemes covered by the regulation, totaling 80 in the first year. After discovering that the Exxon Pension Plan report was not available online, TPR contacted the scheme trustees. The report was published six days later. TPR issued the penalty in May 2023 before it was resolved when Exxon paid the fine in July 2023.

“In our role to protect savers, we take climate change requirements extremely seriously. Our case against the ExxonMobil Pension Plan shows we will and must act by using the mandatory fining regime set out in law,” said Nicola Parish, TPR’s Executive Director for Frontline Regulation.

“The case serves as a warning to trustees about the importance of having proper governance and oversight where third parties are carrying out tasks on their behalf,” she added.

ESG data not fit for assurance at most companies — survey

Three-quarters of companies don’t believe their environmental, social, and governance (ESG) data is ready for assurance or to comply with new regulation, a survey out of consultancy KPMG reveals.

The survey polled 750 companies across various industries, regions, and revenue sizes to assess their readiness for ESG assurance.

It found that larger companies with revenues over US$10bn are more prepared for ESG assurance, scoring an average of 56.3 on a 100-point scale. In contrast, companies with revenues between US$5-10bn and under US$5bn scored 45.3 and 41.7, respectively. Geographically, France, Japan, and the US ranked highest in ESG assurance readiness, while Brazil and China ranked the lowest.

Overall, only 52% of respondents are acquiring some level of assurance for their current ESG disclosures. Of these, 14% are obtaining “reasonable assurance,” while 16% are getting “limited assurance.” Reasonable assurance is the higher standard.

KPMG also identified five “critical steps” that ESG leaders are taking to become assurance-ready, including identifying relevant reporting standards, building up governance and in-house expertise, getting to grips with necessary disclosure and data requirements, digitizing data processes, and working with their value chains to collect ESG information. Companies that ranked as ESG assurance leaders often had more engaged boards, regular ESG training, and controls in place for ESG data.

Half the survey respondents said they saw the potential benefits of ESG assurance beyond compliance, such as increased market share, innovation, improved reputation, and reduced costs.

ISS to refine corporate ESG ratings

ISS ESG, which rates companies’ climate and sustainability efforts, has launched a survey on revamping its scoring methodology. Its purpose is to better align the rater’s approach with “a rapidly evolving regulatory landscape.”

Institutional investors, public companies, academics, professional services firms, and other market participants are invited to provide feedback until October 20.

The survey seeks feedback on ISS ESG’s global approach, which includes the consideration of international norms, voluntary disclosure standards, and regulatory regimes. In addition, it asks questions on materiality considerations, ISS ESG Corporate Rating use cases, as well as the scores and data that make up the rating. 

Participants are also encouraged to answer questions on the relevance of specific ESG issues, including climate change, freshwater use, and biodiversity loss.

White House debuts climate resilience plan

The Biden administration has announced more than US$500mn in climate resilience investments and a package of measures to protect the US from climate impacts.

The National Climate Resilience Framework, released Thursday, outlines best practices and identifies specific actions to make the US more climate resilient. Its focus is to achieve the following six objectives: embed climate resilience into planning and management, increase the built environment’s resilience to climate risk, mobilize finance toward climate resilience solutions, equip communities with information and resources to assess climate risks, protect and manage lands and waters, and help communities become safer, healthier, more equitable, and economically robust.

The rollout of the framework followed the White House’s first Summit on Building Climate Resilient Communities, which was intended to address the worsening impacts of climate risks on Americans. 

Representatives from over 25 states, territories, and Tribal Nations attended the event.