The Securities and Exchange Commission on Monday said that New York-based investment advisor WisdomTree Asset Management Inc. has agreed to pay $4 million for misstatements as well as compliance failures relating to the execution of an ETF investment strategy that was marketed as incorporating environmental, social and governance (ESG) factors.
According to the SEC's order, from March 2020 until November 2022, WisdomTree represented in prospectuses for three ESG-marketed exchange-traded funds, and to the board of trustees overseeing the funds, that the funds would not invest in companies involved in certain products or activities, including fossil fuels and tobacco.
However, the SEC found that the ESG-marketed funds "invested in companies that were involved in fossil fuels and tobacco, including in coal mining and transportation, natural gas extraction and distribution, and retail sales of tobacco products," the agency said.
WisdomTree used data from third-party vendors that did not screen out all companies involved in fossil fuel and tobacco-related activities, according to the SEC.
The SEC's order further finds that WisdomTree did not have any policies and procedures over the screening process to exclude such companies.
