Today’s Solutions: November 28, 2022

Individuals and companies around the world are looking to invest with their conscience and only support eco-friendly enterprises. Many fund managers noticed the rise in popularity of funds in line with ecological, social, and governance (ESG) principles and embellished how green they were. 

More and more financial regulators are fighting back and holding fund managers accountable for greenwashing their services. 

Necessary oversight

British multinational bank HSBC advertised its green accomplishments at length. Its ads said the bank financed net zero initiatives and planted trees to offset carbon emissions. It did not advertise its financing of companies with huge carbon footprints, and the UK’s Advertising Standards Authority took notice.  They are now drafting a warning to the banking giant. 

A trend is growing around the world of regulators holding greenwashing institutions accountable. 

Joe Longo, chair of the Australian Securities and Investments Commission (ASIC), said in March that his organization is focusing on fund managers who overstate their green products. ASIC is holding company boards accountable for their environmental disclosures and the accuracy of their green product promotion. 

Singapore is also making sure investment funds’ claims match their actions. 

“We expect asset managers to ‘walk the talk’ and ensure that their sustainability commitments reflect actual capabilities and practices on the ground,” said Tan Keng Heng, executive director of Singapore’s Monetary Authority. “Greenwashing poses a real and present danger to our collective efforts to date and ambitions in the long run.”

These watchdogs do more than bark

The Securities Exchange Commission (SEC) sued Brazilian mining company Vale for falsely representing itself before the collapse of the Brumadinho dam in 2019. The SEC said Vale misled its investors and the public through its ESG claims. 

The Federal Trade Commission also fined Walmart and Kohl’s for selling dozens of rayon textile products, claiming they were made of bamboo. The retailers were charged for falsely stating their products were made with eco-friendly processes. 

European regulators too are committing to fighting greenwashing, especially in bonds and the stock market. The European Securities and Markets Authority and the International Organization of Securities Commissions—a Madrid-based coalition of stock market enforcers including the U.K.’s Financial Conduct Authority, have committed to the fight.

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