Purpose Investments rejects OSC allegations and prepares to fight charges in October hearing
Canada’s largest securities regulator has launched its first enforcement action tied to greenwashing, targeting Purpose Investments Inc. and its founder Som Seif, according to Bloomberg.
The Ontario Securities Commission (OSC) alleged that between September 2019 and March 2023, the Toronto-based firm claimed to embed environmental, social and governance (ESG) principles across its entire investment process while, in practice, many funds did not consider ESG factors.
In a filing Friday, the regulator said Purpose did not have a formal ESG policy or documented procedures and described its early efforts as “ad hoc.”
According to the OSC, Purpose stated in 2019 that 75 percent of its assets under management incorporated ESG considerations, when the actual figure was below 35 percent.
The regulator highlighted at least 19 occasions where Purpose and Seif promoted their ESG credentials in interviews and on the company’s website.
Remedies being pursued could affect both the firm’s and Seif’s ability to operate in Ontario and may include financial penalties.
Seif rejected the allegations, saying in an interview reported by Bloomberg that the case represents “a misunderstanding about how they interpret what we’ve done from a corporate philosophy around ESG.”
He added that the OSC has not alleged investor harm, prospectus violations, or based its case on investor complaints.
Purpose declined a proposed settlement, choosing instead to “vigorously contest” the action, the Financial Post reported.
In a news release, the firm argued that accepting a settlement would not reflect its principles or its responsibility to investors.
“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 statement said.
The firm noted it updated disclosures in 2023, clarifying which of its funds qualified as ESG after the OSC requested changes. Seif said at the time there was no indication enforcement would follow.
He also said, “Frankly, we’re quite surprised by the OSC’s decision to use their enforcement platform to go after something so minimal.”
As per Bloomberg, ESG funds have faced growing global scrutiny. In the first quarter of 2023, about 500 funds holding US$380bn in assets dropped the ESG label as European Union regulators tightened climate disclosure rules.
Seif contrasted Purpose’s approach with those cases, saying, “None of our funds had ESG in their title, and none of our funds had ESG in their prospectus objectives or strategy.”
A hearing is scheduled for October 6.
