Purpose Investments founder and CEO Som Seif says he will “vigorously contest” the greenwashing allegations the Ontario Securities Commission (OSC) has levied against his firm.
In an application for enforcement proceeding earlier this week, the OSC alleged that Seif and Purpose engaged in “false and misleading sales communications” regarding the extent to which environmental, social, and governance considerations (ESG) factor into its investment-making decisions.
“I will always support our regulators in their important work, but I won’t make false admissions for convenience.”
In 2019, Seif claimed Purpose had become one of the first investment firms in the world to embed ESG core factors across its entire investment process. “ESG Conscious” is also one of the six principles listed on Purpose’s website. But the OSC alleges that Purpose did not consider ESG in making investment decisions for many of the funds it managed. It also alleges the firm had no formal policy or documented procedures to follow through on the promise between 2019 and 2023.
The commission alleges that Purpose made false statements, authorized by Seif, on matters that a reasonable investor would consider relevant, contrary to the Securities Act of 1990. The commission is seeking to fine and suspend Seif and Purpose from managing investor funds as punishment.
“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,” Seif said in a statement.
“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,” he added. “Frankly, we believe this process is not supported by the facts.”
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According to the OSC filing, Purpose funds that already considered, or were going to consider, ESG accounted for only 29 to 35 percent of the total assets under management (AUM) of all funds Purpose managed in 2019, despite Purpose claiming that funds representing 75 percent of total AUM already operated within its new ESG framework.
In a video posted to LinkedIn, Seif framed the OSC’s allegations as focused on the quality of Purpose’s ESG data sources and how it communicated ESG disclosures at a time with no regulatory framework. The OSC claims Purpose’s early ESG commitments were “ad hoc” and that it was reliant on old data. It wasn’t until 2022 that Purpose updated prospectus documents to include ESG considerations for some of its funds, according to the OSC.
Seif claimed that he and Purpose have always “leaned in” when regulators called, but when given the choice between settling by “agreeing to things that weren’t true” or defending itself, the firm chose the latter.
“I will always support our regulators in their important work, but I won’t make false admissions for convenience,” he said.
Purpose said in a statement that it believes the OSC’s concerns reflect interpretive questions about evolving ESG standards rather than a substantive breach. The firm says the capital markets tribunal process will give it a chance to show how its ESG integration methodology was developed “transparently and in good faith to benefit Canadian investors.”
Feature image courtesy Som Seif on LinkedIn.