ETF Issuers Raise Guard Amid SEC Crackdown

ETF Issuers Raise Guard Amid SEC Crackdown

Survey shows firms curbing disclosure as agency moves to limit ‘greenwashing.’

Reviewed by: Zoya Mirza
Edited by: Zoya Mirza

The Securities and Exchange Commission’s effort to curb misleading environmental, social and governance claims has led to unintended consequences: less disclosure and transparency from exchange-traded fund providers, according to a survey. 

The Sage Advisory annual survey found “a noticeable decline in the level of manager disclosure and transparency, which likely reflected increased regulatory scrutiny,” according to the report. Participants were found to be more apprehensive in sharing their responses and overall more guarded when disclosing business practices.   

In an effort to curtail “greenwashing”—manipulating information to gain consumer confidence regarding a company’s ESG claims—the SEC is seeking to require greater transparency, in terms of disclosures, from funds that claimed to invest in companies that touted their behavior in accord with ESG guidelines.    

“I think there’s definitely a lot more of walking a back line of what [ETF providers] are actually doing versus embellishing [it] or talking about what perhaps they would like to do or have a hope to do in the future,” Emma Harper, an ESG research analyst and author of Sage’s annual report, said in an interview. 

Growing Regulatory Scrutiny Is Restricting 

The 2022 Annual ETF Stewardship Report included responses from 23 firms including BlackRock Inc., the world’s biggest ETF provider, as well as JPMorgan Chase & Co. and State Street Corp. Sage said the respondents manage $37 trillion in assets. 

Less than half of them earned a passing score in the “disclosure” category, which Sage attributed to a lack of standards. At the same time, Harper cited growing regulatory scrutiny as a limit to companies sharing the full picture of their behavior.    

“It was a little bit tighter of a response from providers this year, compared to last year’s,” she said.  

Participants were surveyed in seven areas: proxy voting; company engagement; stewardship resources; disclosure practices; climate initiatives; diversity, equity and inclusion; and sponsor level governance.  

Only 70% of participants received an overall passing score of “C” or better. The number of firms earning an “A” rose to seven from four last year.   

“We’ve definitely seen improvements in a number of different areas in terms of how ETF providers are providing better stewardship,” Sage President Bob Smith said in an interview. 

“This is our fourth year of doing this, so it’s a reasonable period of time to expect to see some changes in terms of market practices.”    

Anti-ESG sentiment is on the rise, as some firms chafe at what they claim are restrictive ESG guidelines that hurt returns. Last month, Strive Asset Management launched the Strive U.S. Energy ETF (DRLL), which claimed to align with the “anti-woke” approach that had gained traction in opposition to environmentally friendly or impact investing.   

Smith, however, said he sees ESG as a metric of risk analysis, not a political tool.   

“As far as we’re concerned, at its very core, ESG is all about risk analysis, and the relative exposures that organizations have to myriad different risks. They’re measurable, they’re quantifiable. They impact organizations every day of the week,” he noted.  

“It’s not a red or blue thing. We are very pragmatic in our approach to ESG.”   

Harper echoed Smith’s sentiment, emphasizing that facts and figures were not debatable items.    

“It’s been disappointing to see it being dragged into political theater when it’s pure data,” she said.


Contact Zoya Mirza at [email protected] 

Zoya Mirza is a markets reporter at Her work has appeared in USA Today, Voice of America, and United Press International, among others. Mirza is a graduate of Northwestern University’s Medill School of Journalism. Her past experiences include editorial work in book publishing and conducting political analysis for NGOs and think tanks. Mirza is a passionate bibliophile and collects vintage postcards from every bookstore she visits in a new city.