Safe argues that no harm has been done to investors as the regulator argues that the target has overstated ESG integration.
Purpose Investments founder and CEO Som Seif said he will “vigorously contest” the greenwashing charges brought by the Ontario Securities Commission (OSC) against his firm.
In an enforcement filing earlier this week, the OSC alleged that Safe and Purpose engaged in “false and misleading commercial communications” regarding the extent to which environmental, social and governance (ESG) considerations influence their investment decisions.
“I will always support our regulators in their important work, but I will not make false admissions for the sake of convenience.”
In 2019 Safe stated Purpose was one of the first investment firms in the world to integrate key ESG factors into its entire investment process. “ESG Conscious” is also one of six principles listed on the Purpose website. But the OSC alleges that Purpose did not consider ESG when making investment decisions for many of the funds it managed. It also alleges that the firm did not have formal policies or documented procedures to fulfill the promise between 2019 and 2023.
The Commission alleges that Purpose made false statements with Safe's authority on matters that a reasonable investor would consider material, contrary to Securities Law 1990 As punishment, the commission is trying to fine and remove Safe and Target from managing investor funds.
“We are struggling to understand why OSC is considering this as a topic for enforcement action against Purpose and, more specifically, against me,” Seif said in a statement.
“OSC does not accuse investors of harm or violations of the prospectus, and this case is not based on complaints from investors during the period under review about how our vision was implemented,” he added. “Frankly, we believe this process is not supported by the facts.”
CONNECTED: Purpose Financial receives C$53.5 million investment from Allianz X
According to the OSC, Purpose funds that had or were considering ESG accounted for only 29 to 35 percent of the total assets under management (AUM) of all Purpose funds managed in 2019, despite Purpose claiming that funds representing 75 percent of total AUM are already operating under its new structure ESG.
In a video posted on LinkedInSafe framed the OSC's charges as centered on the quality of Purpose's ESG data sources and how it reported ESG disclosures simultaneously without any regulatory framework. The OSC argues that Purpose's early ESG commitments were “ad hoc” and based on old data. In 2022 alone, Purpose updated its stock prospectuses to include ESG considerations for some of its funds, according to the OSC.
Safe argued that he and Purpose always “leaned in” when regulators came calling, but when the firm had a choice between settling by “agreeing to things that weren't true” or defending itself, the firm chose the latter.
“I will always support our regulators in their important work, but I will not make false admissions for the sake of convenience,” he said.
Target said in a statement that she believes the OSC's concerns reflect interpretive questions about the development of ESG standards rather than a material violation. The firm says the capital markets tribunal process will give it the opportunity to demonstrate how its ESG integration methodology was developed “in a transparent and fair manner in the interests of Canadian investors.”
Artistic image courtesy of Som Safe LinkedIn.
