The first was billed as an "impact" investment, the second as an "ESG" investment and the third as "sustainable" investment.

In fact, those three BlackRock Inc. mutual funds started out as the same fund—one that was marketed and remarketed under different names at different times as Wall Street sold the idea of investing with a social purpose.

How and why the switch was made, not once but twice in six years, is a story for these uneasy times in environmental, social and governance investing.

After a period of heady growth, ESG, a loose category of investments that vaguely promise to do good while doing well, is coming under attack from without and within.

In the U.S., Republicans are railing against ESG and "woke capitalism," in a markets version of the culture wars. In the U.K., a prominent ESG practitioner recently disparaged the very brand of investing he'd been promoting, exposing a level of hypocrisy that shocked even Wall Street.

Now the U.S. Securities and Exchange Commission is examining how asset management companies are portraying ESG-type funds to an often-bewildered public.

At issue is a seemingly simple question that neither regulators nor investment pros have a clear answer for. "Impact," "ESG," "green," "sustainable": What exactly do all these different terms mean? SEC officials worry ordinary investors may be misled.

BlackRock hasn't been accused of misleading anyone. And it's hardly alone in doing a little ESG rebranding from time to time. Since the start of 2019, at least 65 U.S. funds at a range of asset management companies were repurposed as "sustainable," according to data from Morningstar Inc.

Yet it might come as a surprise that the latest iteration of that BlackRock fund—rechristened in 2021 as the BlackRock Sustainable Advantage Large Cap Core Fund—held an $8.3 million stake in Exxon Mobil Corp. and a $1.8 million position in Halliburton Co. at the end of June.

What makes those "sustainable" investments? In an emailed statement, New York-based BlackRock called the fund a "benchmark aware" product that "tilts" toward or away from certain stocks based on their return potential, as well as their ESG characteristics compared with the broad Russell 1000 Index. In effect, when the Russell 1000 increases its weighting for energy stocks, as it has in the past year, the fund may do so, too.

BlackRock also said the name changes reflected how the industry's understanding of the various terms has evolved over time.

"BlackRock offers clients a range of sustainable funds so they can choose how best to achieve their investment objectives," it said.

To the average investor, one fix might seem obvious: truth in advertising. New Balance Athletics once got in trouble for claiming a line of its sneakers helped burn calories. Kellogg Co. got dinged for saying Rice Krispies had immune-boosting properties. The list goes on.

SEC Chair Gary Gensler has been saying change is overdue. The regulator wants to bring fund names more in line with the investments that funds hold.

"A fund's name is often one of the most important pieces of information that investors use in selecting a fund," Gensler said May 25 at an SEC vote in favor of tougher standards. He had no further comment for this story.

But fact is, truth-in-labeling is thorny in ESG because the language is so slippery. While ESG investing has exploded into a more than $35 trillion global business from closer to $23 trillion in 2016, the industry hasn't settled on exactly what "ESG investing" is or isn't.

Even specialists concede that the various terms can mean different things to different people.

"There certainly has been a huge expansion in everything that might be loosely or in a broad sense considered 'ESG,' but there are multiple ways that people interpret what that means," said Cheryl Smith, who oversees ESG investments as a portfolio manager at Boston-based Trillium Asset Management. "We're very much in favor of a truth-in-labeling kind of rule."

Others are less charitable.

"ESG marketing by the large asset managers has largely been misleading," said Ben Cushing, who focuses on fossil-fuel-free finance at the Sierra Club, the 130-year-old environmental organization. Ordinary investors are often led to believe investment funds are focusing more on the climate, the environment or social issues than they are, he said.

"I think that's why it's really important we're seeing regulatory action on this," Cushing said.

Given its size, BlackRock can't escape attention. Lately, Chief Executive Officer Larry Fink has taken flak from all sides for promoting ESG-style investing. On the political right, BlackRock has been criticized for bowing to anti-business forces. On the left, it has been criticized for not doing enough.

It has certainly been a roundabout trip for what's now BlackRock Sustainable Advantage. The fund started out in 2015 as the BlackRock Impact U.S. Equity Fund. At the time, BlackRock Impact promoted itself as way to invest in companies with "positive aggregate societal impact outcomes."

There was no shortage of ambition. An in-house quantitative analysis team, then known as the Scientific Active Equity unit, was going to crunch all the numbers. A new website, BlackRockimpact.com, was going to court customers. The head of impact investing at the time said demand from clients was "unprecedented."

Reality fell short of the exuberant expectations. The fund averaged annualized returns of about 13% in its first four years. However, net flows through November 2019 totaled just $78 million, according to Morningstar data.

BlackRock tried again, this time with a new name. That December, with "ESG" a fresh buzzword, the fund was renamed the BlackRock Advantage ESG U.S. Equity Fund. A month later, Fink declared the world was on the cusp of a "fundamental reshaping of finance" because of climate change.

"As industry definitions evolved, we proactively renamed the fund in 2019 to reflect the portfolio management style and environmental, social and governance strategy being used," BlackRock said in its statement to Bloomberg.

BlackRock Advantage ESG U.S. Equity Fund cast aside its predecessor's stated strategy of investing in companies with positive impacts on society. Instead, it said it would screen out companies with exposure to controversial weapons, tobacco and fossil fuels, beyond certain thresholds. Portfolio managers then would incorporate ESG insights into their stock picks.

After the switch, money flowed in—$9.8 million in January 2020, $18.4 million a month later, and $13 million in March, according to Morningstar. By the end of November 2021, the fund had taken in a net $510.5 million.

But while the ESG industry boomed along with the rest of Wall Street, Washington began taking a closer look at fund-naming practices—and asking questions about revamping the "Names Rule," which dates to 2001.

BlackRock executives conceded that industry practices should be clearer. But they and other industry officials urged the SEC to avoid "prescriptive definitions" for terms such as ESG.

The argument: "ESG," to Wall Street's thinking, describes a broad investment strategy, rather than a specific type of investment.

When BlackRock changed the fund's name a second time to BlackRock Sustainable Advantage Large Cap Core Fund, effective last December, it said the switch was part of a larger push to offer clients more actively managed products that incorporate ESG criteria and sustainability.

In an October letter about BlackRock's broad plans, lawyers for the funds told SEC staff that the "sustainable" in its fund names didn't suggest a focus on any particular type of investment, industry, country, geographic area or tax status.

The newly renamed fund also recast its mission, telling investors that it would pick companies better positioned to capture "climate opportunities" relative to those in a broad benchmark.

It also refined its criteria for investing in environmentally destructive industries like thermal coal and oil sands extraction. In the first quarter, the fund bought Exxon and Halliburton, as well as several other fossil-fuel companies including Marathon Oil Corp. and Devon Energy Corp., according to data compiled by Bloomberg.

For BlackRock, the Sustainable Advantage Large Cap Core Fund today looks like a success. Seven years and three names in, it ranks among the largest of the company's actively managed sustainable-branded U.S. equity mutual funds, with more than $650 million of assets.

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