The fight against greenwashing is coming to the threshold of finance

At the end of May, German justice raided the premises of Deutsche Bank and its fund management subsidiary DWS in Frankfurt as part of an investigation into alleged investment fraud. “greener and more sustainable” what they really were. In its prospectus, the financial institution would have overstated the proportion of its investment in ESG, which was in fact little taken into account in the large number of investments made by the asset manager.

“The example of Germany can inspire neighboring authorities and jurisdictions”

Should the French financial sector, in turn, be worried? It should be recognized that the legal framework surrounding sustainable finance is under construction. But its goal has already been announced: the regulator wants greenwashingwhich can mislead investors. Complexity? “Combating Environmental Risks newbie in market finance and is linked to the goal of protecting depositors and market integrity. The fight against greenwashing or eco-laundering is part of the same goal., explains Elodie Valette, partner at Bryan Cave Leighton Paisner. France has already made significant progress on this issue. It must be said that France is a pioneer in CSR matters with its Sapin 2 law, its declaration of non-financial results, its duty of vigilance law, its Covenant law, its climate and sustainability law. The latter also integrated greenwashing in the field of deceptive commercial practices. The AMF has also defined CSR criteria that allow an economic player to be evaluated outside of the usual financial criteria. “All these CSR tools became in time new tool for communication for business, buta new source of responsibility for the latter”, – develops a lawyer. Financial players are not immune to the temptation: communicating their CSR policies is essential for their development.

thin border

It’s all about finding the right communication. When it comes to ESG or CSR obligations, the risks – reputational, market, regulatory penalties – are high. However, notes Elodie Valette, boundary between communication limited to what is actually invested in work on the CSR plan and greenwashing is minimal. We can quickly switch to abusive marketing, and this is where we fall into deceptive commercial practices. So be careful because Climate change lawsuits could also target financial institutionspartner warns. So far, those that have been brought have gone no further. Some financial institutions are involved in cases of misleading business practices, but not on the basis of greenwashing. But the world of finance must remain vigilant: “It can be imagined that environmental compliance checks develop well in practice, because regulators have become stakeholders in sustainable financing, which includes combating greenwashing. The example of Germany can inspire neighboring authorities and jurisdictions in France, the rest of Europe or abroad.

“Transparency in sustainable finance should be a key word for players in the financial industry”

Especially since things are moving on a European scale. The CSRD directive is expected in the month of October, and implementation is planned from 2024. There is also a provision on taxonomy that went into effect last January, but with gradual application. For financial players, “it’s hard to see how all these rules will fit together, remarks Elodie Valette. What can businesses do to protect themselves? “Transparency in sustainable finance should be a key word for players in the financial industry. There is no perfect solution even if the criteria set by the Taxonomy Ordinance and its implications for the classification of sustainable investments, although they do not apply to all sectors of activity, are such as to allow them to assess the sustainability of their approaches and thus avoid green laundering. Companies continue to strengthen their legal and compliance departments, but we always come back to the same thing: since sustainable finance is in full construction, we must wait for the next texts, their transposition and the evolution of case law..

Olivia Fuentes