Suspicion of greenwashing: House searches at German financial institutions
Making financial products appear greener and more sustainable than they are, can be illegal, because such actions can constitute investment fraud. For this reason, at the end of May, police, public prosecutors and representatives of the German financial supervisory authority (BaFin) raided the premises of a German financial institution and a subsidiary (a fund company) in Frankfurt a.M. (Germany). The tip-off had come from within the bank’s own ranks: The head of sustainability had pointed out potential greenwashing internally – and was subsequently dismissed.
Financial institutions around the world should closely observe the investigations, as this is not likely to be an isolated case. Greenwashing, as has become clear since the house searches, is not a trivial offence. The regulatory and law enforcement agencies on both sides of the Atlantic took the whistleblower’s accusations seriously. Both the German financial regulator BaFin and the US Securities and Exchange Commission (SEC) as well as the U.S. Department of Justice (DOJ) began investigating the greenwashing allegations. The DOJ reprimanded the financial institution already in December 2021 for failing to report the greenwashing complaint, although the financial institution would have been required to do so under a settlement in another legal case.
The whistleblower welcomes government measures to curb greenwashing and greenhouse gas emissions. “We have watered down ESG (Environmental Social Governance) to a meaningless concept. I hope the recent criticism of ESG and the resurgence of climate activism, along with calls for more regulation and more reporting standards, will get us back on track.” In a recently published article in Swiss newspaper NZZ, the whistleblower and former Group Sustainability Officer declared she expects that in the future, financial institutions will have to be as precise in disclosing non-financial information such as climate protection as they are in disclosing financial information.
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Thursday, 24 March 2022
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