Highlights

• Ontario Securities Commission files first greenwashing case against Purpose Investments over alleged misleading ESG statements.
• Regulator claims ESG factors covered less than 35% of assets, far below the firm’s public claim of 75%.
• Hearing scheduled for 6 October, with potential financial penalties and limits on the company’s operations.

Canada’s financial regulator, the Ontario Securities Commission (OSC), has started its first enforcement action for greenwashing involving an investment company.

The OSC alleges that Purpose Investments Inc. (”Purpose”), based in Toronto, gave misleading information about how it used environmental, social and governance (ESG) factors in its investment process.

According to the OSC, between September 2019 and March 2023, the firm repeatedly stated that ESG principles guided all of its decisions.

Read More: What Are The Main Greenwashing Tactics Companies Use?

The regulator claims these statements were misleading because many of the funds managed by Purpose did not apply ESG considerations, and the company lacked a formal ESG policy. The OSC cites at least 19 instances where Purpose and its founder, Som Seif, highlighted their ESG approach in interviews and on the company’s website.

The OSC says that in 2019, Purpose claimed that 75% of its assets used ESG factors, whereas the actual figure was below 35%. The regulator is seeking penalties that could limit the ability of the firm and its founder to operate in Ontario and may include financial sanctions. A hearing is set for 6 October.

Purpose disputes the allegations. Som Seif argues that the regulator misunderstood the company’s philosophy and notes that the OSC has not alleged investor harm or violations of fund prospectuses.

The company updated its disclosures in 2023 after the OSC requested clearer information and says it was surprised by the decision to move forward with enforcement.

Also Read: BlackRock Off Texas Blacklist After Climate Policy Exit

This case comes on the back of increased global scrutiny of ESG investment claims. In Europe, hundreds of funds have recently dropped ESG labels in response to tougher climate-related disclosure rules, showing that regulators worldwide are focusing more closely on the accuracy of sustainability statements.

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Source: Bloomberg