Regulation on an ‘international level’ needed to stamp out greenwashing

On Tuesday, officials raided Frankfurt offices of Deutsche Bank’s DWS unit on allegations that it was misleading investors about “green” investments.

Following the raid, deVere Group CEO Nigel Green has called for an effort by regulators globally to come together and stamp greenwashing out, particularly as more investors continue to consider ESG factors in their investments.

“But to make sure this tsunami of private money is put to work in the correct way, it’s imperative that global regulators work together on an international framework of standards,” Mr Green said.

“This will help prevent greenwashing – misleading environmental claims – which could damage the credibility needed to guarantee the inflows are maintained.

“Although watchdogs are increasing scrutiny on alleged greenwashing practices, more still needs to be done. We need joined-up thinking on an international level to tackle an international issue.”

Mr Green added that regulators must catch up to meet the increasing demand of ESG considerations, noting a lack of consistency in definitions and data.

“Recent events in Frankfurt highlight the urgent need for a workable global regulatory framework that will help investors reach their financial objectives whilst proactively protecting people and the planet,” he said.

The news comes after greenwashing was identified as one of the biggest hurdles for financial advisers looking to incorporate responsible investment (RI) into their practices.

In a recent webinar hosted by independent investment consulting business Evergreen Consultants, Ethical Invest Group founder Alexandra Brown urged advisers to be cautious.

“Greenwashing is becoming a bit more rampant because there are funds that want to join the bandwagon and add terms like ESG and what have you,” Ms Brown said.

“Underneath the hood, it’s not so ethical or responsible.”

In March, the Responsible Investment Association Australasia (RIAA) released the results of a study which found that knowing about responsible investment is now the top expectation of financial advisers.

Over 1,000 Australians surveyed this year expect their advisers to be knowledgeable about responsible investment, which increased from 54 per cent in 2020 to 64 per cent in 2022.

Around 74 per cent of Australians are considering moving to another provider if they found out their current fund was investing in companies inconsistent with their values.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.