Attorney General Bonta Expresses Support for SEC Proposal to Increase Transparency and Accountability of Funds Claiming to Prioritize ESG Factors

Tuesday, August 16, 2022
Contact: (916) 210-6000,

OAKLAND – California Attorney General Rob Bonta today urged the Securities and Exchange Commission (SEC) to finalize rules that would require investment companies and advisors to disclose information about how they use environmental, social, and governance criteria in investment products labeled as “ESG.” While a number of investment companies now offer funds that purport to prioritize ESG factors, evidence has emerged that many of these funds give little consideration to these factors, and instead tout ESG merely as a way to lure investors who want to invest according to their values. In the letter, Attorney General Bonta joins a multistate coalition in arguing that the SEC’s proposal would increase transparency and accountability in this growing investment sector, benefiting both investors and those companies who are actually committed to ESG values.

“As investors increasingly seek to align their money with their values, there’s been an explosion in ESG-focused investment products and funds,” said Attorney General Bonta. “Unfortunately, most of these funds are not transparent about how they consider ESG criteria in their decision-making, and some of these funds in reality have done little to take environmental, social, or corporate governance values into account. Investors have a right to have all the facts before they decide where to put their money. I urge the SEC to swiftly finalize this critical rule to protect retail and institutional investors from those looking to exploit them.” 

The last decade has seen a proliferation of companies offering funds and strategies that claim to implement ESG factors in response to increased demand from retail and institutional investors. The number of funds available to U.S. investors that advertise ESG as a significant consideration has more than doubled in the last five years, and U.S. mutual fund and ETF assets labeled as “ESG” increased 33% in 2021 alone – to $400 billion. This trend is only expected to accelerate, with global ESG assets estimated to grow from $35 trillion to $50 trillion by 2025.

In an effort to ensure investors have sufficient information to evaluate and compare investment products labeled as “ESG,” the SEC has proposed rules requiring investment companies and advisers to disclose information about how they use ESG criteria. Attorney General Bonta joins seven attorneys general in strongly supporting this goal. 

Earlier this year, Attorney General Bonta led a multistate coalition in a letter supporting the SEC’s proposal to require U.S. companies to provide accurate and detailed information about the financial risk they face from climate change. Today’s letter continues the Attorney General’s effort to help Californians make informed decisions about their investments that recognize the growing threat of climate change and align with their values. 

Attorney General Bonta joins the attorneys general of New York, Delaware, Illinois, Maryland, Minnesota, and New Jersey in filing the letter.

A copy of the letter is available here.

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