Regulatory Interventions Into ESG Investments Look Set to Rise: Goodbye Greenwashing?

London corporate partner Melanie Wadsworth and associate Paige Izquierdo coauthored an article for Thomson Reuters titled “Regulatory Interventions Into ESG Investments Look Set to Rise: Goodbye Greenwashing?”, which discusses the future of regulatory interventions in environmental, social and governance (ESG) investments following a greenwashing probe into DWS, one of Germany’s largest asset managers, majority-owned by Deutsche Bank.

Wadsworth and Izquierdo provide an overview of the alleged misrepresentation and note that despite the DWS supervisory board’s internal review concluding that there was no evidence to support the allegations, investigations by the U.S. Securities and Exchange Commission (SEC) and Germany’s financial regulator (BaFin) were triggered.

The authors say the challenge for the SEC and BaFin is that there is no formal market definition of what constitutes a “green”, “sustainable” or “ESG-compliant” investment, and they list what measures are being taken to improve clarity. Wadsworth and Izquierdo explain that as ESG regulation becomes clearer, the risk of successful enforcement action increases, and they conclude that firms should establish best-practice policies and procedures to protect their clients and themselves.