The Securities and Exchange Commission charged New York-based investment adviser WisdomTree Asset Management Inc. for making anomalies and for compliance failures in relation to the way it managed the funds it traded including environmental, social and governance factors.

According to the SEC order, from March 2020 to November 2022, WisdomTree invested in companies involved in fossil fuels and tobacco in three ESG-traded ETFs, defying the guidelines presented in the funds' prospectuses.

Related: The backlash against ESG is seen in the sharp drop in fund launches

Without admitting or denying the SEC's findings, WisdomTree agreed to a cease and desist order and to pay a civil penalty of $4 million.

WisdomTree launched the funds in March 2020 and liquidated them in February of this year, according to an SEC filing from the firm. The ETFs had “cumulative average monthly assets under management of approximately $119 million over their lifetime as ESG named funds,” according to the filing. The three delisted ETFs included WisdomTree International ESG Fund (RESD), WisdomTree Emerging Markets Fund (RESE) AND WisdomTree US ESG Fund (RESP).

Related: Federal Court judge halts Missouri's anti-ESG rule

In addition to the fine, WisdomTree's filing said it “expects that all legal and other related expenses incurred by WTAM in connection with this matter will be covered by insurance, less a $1.0 million deductible.”

Investments in ESG funds included coal mining and transportation, natural gas extraction and distribution, and tobacco product retailing.

According to the SEC order, WisdomTree used data from third-party vendors that did not audit all companies involved in fossil fuel and tobacco-related activities. The SEC's order further finds that WisdomTree had no policies and procedures related to the screening process to exclude such companies.

“At a basic level, the federal securities laws enforce a straightforward proposition: investment advisers must do what they say and say what they do,” Sanjay Wadhwa, acting director of the Division of Enforcement, said in a statement. SEC. “Where investment advisers indicate that they will follow particular investment criteria, whether they invest in companies engaged in certain activities, or not invest in, they must adhere to those criteria and appropriately disclose any restrictions or exception to these criteria.

WisdomTree has approximately $113 billion in assets under management globally.