Fat-free investing

May 24, 2022 View in browser   By Lorraine Woellert The SEC wants you to have nutritional facts on your ESG funds. | Larry Crowe/AP Photo FAT-FREE INVESTING — What does your mutual fund have in common with fat-free milk? Securities and Exchange Commission Chair Gary Gensler asked that question back in March, when he wondered aloud whether funds that tout their environmental, social and governance cred are as green or socially conscious as they claim. He called for the equivalent of nutrition labeling for investing. On Wednesday, the SEC will publish those labeling rules as it attempts to rein in greenwashing. No one we know has seen the proposal, but if the commission's meeting agenda is any guide, it will aim to standardize ESG disclosures to help investors who want to align their money with their own social and environmental agendas. "That word — standardized — is the most important word on the agenda," said Michael McGrath, a Boston-based law partner at K&L Gates. It's a clue, he said, that the SEC might be establishing labels or categories for funds that could make it easier for rank-and-file investors to know what they're investing in. But wait — the SEC already has a law for that sort of thing. It's called the Investment Advisers Act of 1940, and the agency cited it Monday when it announced a $1.5 million fine against BNY Mellon Investment Adviser for making misleading statements about ESG funds. BNY had said that all investments in its ESG funds had undergone a quality review, which proved not to be the case. The firm has updated its materials and will pay the fine. It's the first time the SEC has settled an ESG case. The SEC and the Justice Department also are investigating Deutsche Bank AG's asset-management arm after its former head of sustainability said the division exaggerated its ESG bona fides. So why is this new rule important? Gensler has power to go after fraudsters, but he also wants to make investing safer for people who don't get the inner workings of Wall Street. Retail investors these days are flooded with ESG pitches. Dozens of apps promise to help you "put your money where your heart is" or "swipe with purpose." It can be difficult to know what's what. "You're the people to whom they're marketing their funds as sustainable or green," Gensler said in March. "It's easy to tell if milk is fat-free. it might be time to make it easier to tell whether a fund is really what they say they are." We'll know more on Wednesday, but it seems highly likely that a new rule will lead to more enforcement actions like the one we saw Monday at BNY Mellon. "We will almost certainly see more and more mandated ESG disclosure, which is an opportunity for expanded enforcement," McGrath said. "I would not be surprised to see more greenwashing actions before these soon-to-be-proposed rules come into affect." Fun fact: An estimated 800 registered investment companies have a combined $3 trillion in assets that they claim meet some sort of ESG goal. To watch this debate IRL, here's Elon Musk's tweet after S&P Global Ratings removed Tesla from its ESG funds. And here's S&P's explanation for its move. YOU TELL US Lorraine has always wanted to check out the Uyuni salt flat and its famed mirages. Check out this great read on one mirage in particular – lithium mining. A H/T today to Zack Colman and Jordan Wolman for their contributions. The Long Game is your source for news on how companies and governments are shaping our future. Team Sustainability is editor Greg Mott, deputy editor Debra Kahn and reporters Lorraine Woellert and Jordan Wolman. Reach us all at gmott@politico.com, dkahn@politico.com, lwoellert@politico.com and jwolman@politico.com. Want more? Don't we all. Sign up for the Long Game. Four days a week and still free!   DON'T MISS THE 2022 GREAT LAKES ECONOMIC FORUM:  POLITICO is excited to be the exclusive media partner again at the Council of the Great Lakes Region's bi-national Great Lakes Economic Forum with co-hosts Gov. JB Pritzker and Mayor Lori Lightfoot. This premier, intimate networking event, taking place June 26-28 in Chicago, brings together international, national and regional leaders from business, government, academia and the nonprofit sector each year. "Powering Forward" is this year's theme, setting the stage to connect key decision-makers with thought leaders and agents of change to identify and advance solutions that will strengthen the region's competitiveness and sustainability in today's competitive climate of trade, innovation, investment, labor mobility and environmental performance. Register today.     AROUND THE WORLD G'DAY, ALBO — Australian voters on Saturday dumped their conservative Liberal-National Coalition government, which has ruled for nine years. The pro-coal government suffered massive defections, with many wealthy voters shifting to the Greens and a group known as the Teal Independents, which is backed by climate advocates, POLITICO's Ryan Heath reports. Center-left Labor Party leader Anthony Albanese — known Down Under as Albo — is now Australia's 31st prime minister, succeeding Scott Morrison. In his victory speech, Albo promised to make Australia a "renewable energy superpower." Ryan points us to five charts on the Australian election. The electorate has split into three equal-sized chunks. Green issues now animate voters, and the affluent have defected from conservative parties. DATA DIVE TRAPPED WORKERS — The global labor market continues to reflect repercussions of the coronavirus pandemic. The number of hours worked fell significantly in the first three months of 2022, and there are 112 million fewer full-time jobs today than there were before the pandemic, according to the U.N. International Labor Organization. In less-industrialized economies, the number of full-time jobs is down between 3.6 percent and 5.7 percent from pre-crisis levels. TRAPPED GASES — Greenhouse gas pollution trapped 49 percent more heat in 2021 than in 1990, the National Oceanic and Atmospheric Administration reports. NOAA's Annual Greenhouse Gas Index, the AGGI , tracks the warming influence of human-generated gases, including carbon dioxide, methane, nitrous oxide, and chlorofluorocarbons. "The AGGI tells us the rate at which we are driving global warming," Ariel Stein, acting director of NOAA's Global Monitoring Laboratory, said in a written statement. "The primary gases responsible for climate change continue rising rapidly, even as the damage caused by climate change becomes more and more clear. The scientific conclusion that humans are responsible for their increase is irrefutable." WASHINGTON WATCH BIDEN'S EJ REPORT CARD — As part of his whole-of-government approach to climate change, President Joe Biden promised that 40 percent of the benefits of certain federal investments would flow to marginalized communities burdened by pollution. It was one of his first promises after taking office. On Monday, the White House gave a progress report on the Justice40 plan, citing at least $29 billion in spending toward the mission. The message aimed to counter criticisms from environmental justice advocates that the White House has been slow to live up to promises to address pollution problems facing low-income and minority communities. Behind the curtain: Fact is, Biden has limited ability to direct projects and spending under the infrastructure law to any particular community. Many programs use statutory formulas to distribute money to states. EJ advocates want the administration to create new programs for investment rather than rebranding existing ones as Justice40. IN YOUR BACKYARD A PROBLEM EVEN BIG TECH CAN'T FIX — Apple Inc. spent millions of dollars trying to help a group of people find housing. Nine months later, those people are still homeless. Read the story in The Mercury News. WHAT WE'RE CLICKING — The pandemic boosted trust in science. An annual State of Science survey from 3M Co. found that Americans of all ages have exceptionally high trust in science, and the numbers have risen since the pandemic. Explore the data here. — Dead: Fresh Kills, once the world's largest landfill, is officially history. New York City officials will gather Tuesday to mark the final certification and closure of the Staten Island site, which is being tansformed into a 2,200-acre park. SILive has some great photos.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.       Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Lorraine Woellert @Woellert Jordan Wolman @jordanwolman   Follow us

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