UNITED STATES
ASIA-PACIFIC
EUROPE
Click on a region below to see our regional perspectives.
EUROPE
The European Union’s regulatory framework on greenwashing is unquestionably a global frontrunner. From March 2021, new regulations require financial market participants to categorise investment products based on ESG objectives. From 1 January 2022, the new regulations will set out which economic activities are classed as sustainable and flesh out the incorporation of sustainability issues into the EU financial services regulatory framework.
Since these regulations are all supplemented by further delegated acts which have not been fully implemented at this stage, market participants still have a window to adjust to these regulations without significant legal or regulatory risk.
UNITED STATES
ESG-driven investment practices, including concerns over greenwashing, have become a priority area for the US markets watchdog the Securities and Exchange Commission in the last two years. Current and upcoming developments by the securities regulator include:
• observations of “potentially misleading statements regarding ESG investing processes and representations regarding the adherence to global ESG frameworks” during examinations of funds and investment institutions;
• the establishment of a new Climate and ESG Task Force in the agency’s enforcement division, with a mandate including ESG-related misconduct, specifically disclosure of climate risks; and
• the anticipated release of the SEC’s proposed mandatory climate risk disclosure rulemaking for public companies by the end of 2021.
ASIA-PACIFIC
In July 2021, the Australian Securities and Investments Commission (ASIC) reviewed managed and superannuation funds to assess whether investment strategies were “as green or ESG-focused as claimed”. ASIC has separately issued letters reminding several firms of obligations to make credible statements. Australia has also seen litigation launched by shareholders against financial institutions, probing whether firms have complied with stated commitments on sustainable investment.
While Hong Kong has not yet witnessed greenwashing litigation, regulators are monitoring the risks. In June 2021, the Securities and Futures Commission (SFC) issued updated guidance on enhanced disclosures for funds that incorporate ESG factors as a primary investment focus. The SFC’s chief executive has also raised concerns about lack of regulatory frameworks on ESG ratings, noting they raise serious questions about greenwashing.
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