Canada’s largest securities regulator, the Ontario Securities Commission (OSC), has initiated action against misleading ESG claims.
According to Bloomberg, OSC has initiated its first-ever enforcement action related to greenwashing, against Toronto-based Purpose Investments Inc.
According to a Bloomberg report, the OSC alleges that between September 2019 and March 2023, Purpose made statements about its integration of ESG factors that were “misleading, untrue, and in conflict with the prospectuses of the funds it managed.”
The regulator’s filing indicates that Purpose and its founder, Som Seif, could face financial penalties and restrictions on their ability to operate in Ontario.
OSC alleges false advertising and lack of formal policy:
The OSC’s filing points to at least 19 instances where Purpose and Seif marketed their ESG credentials, including on the company’s website and in media interviews.
The regulator alleges that Purpose did not, in reality, consider ESG in investment decisions for many of the funds it managed and had no formal ESG policy. The OSC also claims that in 2019, the percentage of Purpose’s assets under management that considered ESG was less than 35%, despite the firm claiming a 75% figure, Bloomberg reported.
Firm contests enforcement action
As per media reports, Purpose Investments is contesting the enforcement action, with a hearing scheduled for October 6. Som Seif called the case a “misunderstanding” of how the OSC interprets the firm’s corporate philosophy on ESG. He noted that the OSC has not alleged investor harm or prospectus violations or based the case on investor complaints.
Seif also pointed out that none of the firm’s funds had “ESG” in their titles or prospectus objectives. In 2023, Purpose updated its disclosures to clarify which funds were classified as ESG following an OSC request, and Seif expressed surprise that the request led to enforcement action, calling the situation “so minimal.”
Global scrutiny of ESG investments:
The action against Purpose Investments reflects increasing global scrutiny of ESG investment funds. Regulatory bodies, particularly in the European Union, are cracking down on climate and ESG-related disclosures. This has led to a surge in funds dropping the ESG label.
A report by Bloomberg Intelligence analysts found that fund re-brandings surged fivefold year-over-year in the first quarter of 2025, with over 500 funds shedding the ESG designation.
