The U.S. Securities and Exchange Commission recently charged Invesco Advisers Inc. for making misleading statements about the percentage of company-wide assets under management that integrated environmental, social, and governance, or ESG factors in investment decisions. The Atlanta-based registered investment adviser agreed to pay a $17.5 million civil penalty to settle the SEC’s charges.
According to the SEC’s order, from 2020 to 2022, Invesco told clients and stated in marketing materials that between 70 percent and 94 percent of its parent company’s assets under management were “ESG-integrated.”
However, in reality, these percentages included a substantial amount of assets that were held in passive ETFs that did not consider ESG factors in investment decisions. According to the SEC, this included Invesco’s largest ETF, the Invesco QQQ Trust – an index product designed to track the 100 largest non-financial companies traded on the Nasdaq exchange. Furthermore, the SEC’s order found that Invesco lacked any written policy defining ESG integration.
As background the SEC order said that by fall 2019, Invesco believed that incorporating ESG considerations into its portfolio management activities globally was of commercial importance. An internal analysis completed by senior ESG team members indicated that, company-wide, at least $370 billion in assets under management were “at risk” of clients moving the assets to another firm, prompting Invesco to accelerate its “ESG integration” effort. Consistent with its effort to market its ESG capabilities, Invesco made claims to certain clients and potential clients about the percentage of firmwide AUM at Invesco that was “ESG-integrated.” Invesco also included the percentage of company-wide ESG-integrated AUM in its publicly available ESG Investment Stewardship Reports, which described “ESG integration” as including “ESG considerations as an influence in investment decision making,” “[b]road and systematic ESG integration taking place at a strategy level and across the process,” and “[c]onsideration of financially material ESG aspects.”
“As stated in the order, Invesco saw commercial value in claiming that a high percentage of company-wide assets were ESG-integrated. But saying it doesn’t make it so,” said Sanjay Wadhwa, acting director of the SEC’s enforcement division. “Companies should be straightforward with their clients and investors rather than seeking to capitalize on investing trends and buzzwords.”
The order charges Invesco with willfully violating the Investment Advisers Act of 1940. Without admitting or denying the order’s findings, Invesco agreed to cease and desist from violations of the charged provisions, be censured, and pay the aforementioned $17.5 million civil penalty.
Invesco Advisers Inc. is a Delaware corporation with its principal place of business in Atlanta. Invesco has been registered with the SEC as an investment adviser since Dec. 30, 1988. In an April 2024 filing, Invesco said it had 37,000-plus clients and approximately $746 billion in regulatory AUM, including managing over 450 pooled investment vehicles that collectively hold over $580 billion in regulatory AUM. Invesco Group Services Inc. is the sole owner of Invesco Advisers, and Invesco Ltd. is the ultimate parent of the company.
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