Canada’s largest securities regulator has accused fund manager

Purpose Investments Inc.

and its founder and chief executive Som Seif of “

greenwashing

” in communications with clients, allegations they plan to “vigorously contest.”

In an application for enforcement proceeding, the

Ontario Securities Commission

(OSC) alleged that Purpose and Seif communicated “misleading” or “untrue” information about consideration of environmental, social and governance (ESG) considerations by funds they manage between the fall of 2019 and March of 2023.

 

The regulator took issue with the data used by the company to evaluate ESG factors and whether these factors were applied consistently by Purpose.

 

While telling clients and prospective clients that ESG factors were central to its investment processes and decisions across industry sectors, “Purpose did not consider ESG in making investment decisions for many of the funds it managed,” the OSC

alleges, saying much of the early efforts were “ad hoc” and that there were significant gaps in the amount and quality of ESG data accessible by Purpose employees.

 

The regulator also alleges that the investment firm did not implement any formal policy and did not have documented procedures relating to the consideration of ESG by its portfolio management team for funds managed by the firm.

 

In a news release late Friday, shortly after the application was made public, Purpose said it was a pioneer in including ESG factors in investment decision-making, beginning in 2019, a strategy ultimately employed by 88 per cent of investment professionals.

Seif questioned why the regulator is focusing on him and his firm while alleging no investor harm.

“We are struggling to understand how the OSC is seeing this as a topic for enforcement action against Purpose, and even more specifically against me,” he said in the news release.

 

“The OSC is not alleging investor harm or prospectus violations, nor is this case based on investor complaints during the period in question about the way our vision was delivered. Frankly, we believe this process is not supported by the facts.”

 

The fund manager and Seif rejected an offer to enter a settlement to address the regulator’s concerns, according to the news release.

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“While it may have been expedient to accept a settlement, we determined that such an outcome would not have reflected our principles or our responsibility to our investors and the public,” Purpose said. “Our decision to contest this matter reflects our commitment to standing up for what is right and upholding the highest standards of transparency and integrity.”

The firm said its approach to ESG stemmed from a fundamental conviction that environmental, social and governance factors could add genuine value to investment outcomes and not just serve as a values-based screening mechanism.

 

“Rather than creating separate ESG-specific funds while leaving the rest of the existing funds business unchanged, Purpose pioneered an approach that had the goal of embedding ESG data and considerations as an investment process input factor,” the news release said.

• Email: bshecter@nationalpost.com