Investing in ESG funds is like trying to navigate "the Wild West" as both regulations and enforcement fall short, according to Andrew Behar, the chief executive of As You Sow.

The shareholder advocacy group spearheaded a study that found 60 of 94 ESG funds failed to adhere closely to the principles of environmental, social and governance investing. The findings, which have been shared with the U.S. Securities and Exchange Commission, indicate that "one can't tell the difference between a prospectus for true ESG offerings vs. greenwashing mutual funds and ETFs," the nonprofit said Tuesday.

The researchers, a group of graduate students from University of California, San Diego, used data-analytic tools to establish that language in many funds' prospectuses lacked clarity when disclosing why they held stakes in companies involved in areas such as fossil fuels, deforestation, firearms and weapons, prisons and tobacco.

"We see funds with ESG in their names getting F's on our screening tools because they hold dozens of fossil-fuel extraction companies and coal-fired utilities," Behar said.

The study underscores the need for a common glossary of terms and fund classifications that could help the SEC enforce "truth in labeling" and eliminate "confusion and misleading marketing, fund naming and prospectus language," Behar said in an interview.

Representatives from As You Sow met with the SEC last week to share their analysis and make recommendations. The SEC has previously said it's investigating potential misconduct related to flawed sustainability claims.

"Investors need asset managers to establish the philosophy underlying a fund and align the prospectus language and fund name with the intent and the holdings," Behar said. "The problem is that there is currently no truth in labeling."

As You Sow wants the SEC to require that all prospectuses be produced in a "machine-readable" format to enable easy automated comparisons of the documents' wording. If the regulator fails to do so, "we may be forced to file a petition," Behar said.

Jon Hale, Morningstar Inc.'s U.S. head of sustainability research, wrote in a note published last month that many "greenwashing" claims are caused by a mismatch between investor expectations and a fund's specific sustainable-investing approach. "Funds can do a better job of informing investors about exactly which approach or approaches to sustainable investing they employ," he said.

For example, the urgency of the climate crisis means all sustainable funds should be publishing a statement indicating how they're addressing climate-related issues, Hale said.

Tim Quinson reports for Bloomberg News.

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