Active financial supervision key lever against greenwashing – NGO
Clean Energy Wire
Greenwashing-related incidents have an overall negative effect on company stock prices, but only once financial supervisory bodies intervene, according to a report by finance NGO Finance Watch Germany. “The fact clearly demonstrates that active financial supervision is one of the most crucial mechanisms for curbing greenwashing,” the report found. Financial investigators had to be vigilant in detecting such cases, thoroughly investigate them and “promptly take action to sanction misconduct,” the authors write. This would help make existing sustainable finance regulations effective.
The NGO analysed 90 greenwashing events from 41 listed companies – such as media reports about an incident, or supervisory action – and assessed stock price reactions from one day before an event until one day after. It found that supervisory action resulted in the most severe negative stock market reaction. The report highlights the case of Deutsche Bank’s asset manager DWS, which had overstated its ESG investments, writes the NGO. When investigations by authorities from the U.S. and Germany were made public, the share price dropped significantly.
In 2023, U.S. financial authority SEC had imposed a fine of 25 million dollars on DWS for anti-money laundering violations and misstatements regarding ESG investments, hailed as a wake-up call by NGO Greenpeace.
