The OSC filed an enforcement action against Mr. Seif and his company, claiming both made false or misleading statements about environmental, social and governance investing.Fred Lum/The Globe and Mail
One of Canada’s most well-known money managers is facing allegations of greenwashing from the Ontario Securities Commission, charges that put Purpose Investments Inc. founder Som Seif at risk of being banned from the investment industry.
Late Friday, the provincial market regulator filed an enforcement action against Mr. Seif and his company, claiming both made false or misleading statements about environmental, social and governance, or ESG, investing. The OSC cited 19 occasions between September, 2019, and March, 2023, when Mr. Seif or Purpose publicly claimed to consider ESG factors when making investment decisions.
“In reality, Purpose did not consider ESG in making investment decisions for many of the funds it managed,” Alvin Qian, senior litigation counsel at the OSC, said in an application to the provincial Capital Markets Tribunal.
“Purpose did not implement any formal policy and did not have documented procedures relating to the consideration of ESG by its portfolio management team.”
The case carries potential maximum fines totalling $25-million – $5-million for each of the five alleged violations of Ontario securities law – and for Mr. Seif to resign from Purpose and be at least temporarily banned from investing or serving as an officer or director at any other money manager.
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An initial hearing on the matter is set for Oct. 6, but in an interview, Mr. Seif dismissed the allegations as “nonsense.”
“This has nothing to do with an enforcement matter,” he said. “It is a political matter. They are trying to find a greenwashing case to go after and they are targeting Purpose.”
“We aren’t going to settle and agree to things we didn’t do,” Mr. Seif said. “You settle when you’re guilty of something.”
In 2019, Purpose became one of Canada’s first large money managers to start incorporating ESG factors into its investment decisions. At the time, Mr. Seif said Purpose was taking a different approach from traditional ESG funds that screen out certain companies for not meeting certain ethical or environmental standards.
Purpose, Mr. Seif said, could still invest in anything it felt would generate a good return, even if that meant a particular fund would receive a lower ESG score.
“ESG was a factor that we considered in our investment processes, but just like pension plans and investment managers everywhere, we can still own Suncor or coal companies if that is the right investment for the client,” he said.
“Our ambition was a corporate philosophy that ESG was something we had the vision to start to incorporate into our investment strategies, but we were never articulating or communicating that we were an ESG company.”
The OSC is trying to argue that Purpose was not doing ESG “and I think that is not correct,” he said.
Mr. Seif said the OSC took the unusual step of naming him personally in its enforcement action in order to force a settlement.
“Corporations settle all the time because they are either guilty of something or they want it to get past them, and my view was this is too important and I need to say this is not an acceptable behaviour,” he said. “If I settle that, I am creating a precedent for the industry that is awful for everybody else.”
“I am, frankly, so disappointed in the OSC,” Mr. Seif said.
Editor’s note: This article has been updated to clarify that the case brought by the Ontario Securities Commission carries potential maximum penalties that include a fine of $5 million for each violation of securities law and a requirement for Som Seif to resign from Purpose and be at least temporarily banned from investing or serving as an officer or director at any other money manager.