Greenwashing, the act of misrepresenting ESG and/or sustainability practices, whether intentionally or unintentionally, has been a trending topic in news stories. However, misleading claims are not new to the financial sector or asset managers. Securities regulators around the globe are paying particular attention to potential instances of greenwashing in order to protect investor capital. This includes investments that may have been—or already have been—directed into products or strategies marketed as ESG focused or sustainability focused. The scale in the financial sector is significant in its annual Global Responsible Investment Trends published in March 2025, the UN-supported Principles for Responsible Investment reported a signatory base encompassing aggregate AUM of $89.3 trillion.
In December 2023, the International Organization of Securities Commissions (IOSCO) released a report on supervisory practices to address greenwashing. In the report, IOSCO notes several concerns—chiefly, the need for “… reliable, consistent, and comparable sustainability related information.” Securities regulators in many of the world’s largest financial markets have already taken enforcement action against perceived greenwashing under existing securities marketing regulations. Examples of issues regulators have addressed include:
- Advertised ESG practices that are misaligned with actual practices
- Contradictions between investments and claims made in fund disclosures
- Insufficient policies and procedures to ensure adherence to stated ESG practices
- Failure to follow ESG policies and procedures
- Insufficient processes to ensure no significant harm to environmental or social goals, including:
- Lack of consideration of all mandatory principal adverse impacts
- Insufficient criteria for assessing good governance
- Lack of controls for managing sustainable investments by external managers
- Holding investments in securities of issuers that should have been excluded
- Misleading claims due to lack of research or ESG screening
- Use of exclusionary criteria from multiple data providers without accounting for known data limitations
- Misrepresentation of the recyclability of consumer products on Form 10-K SEC filings
Our Guidance
Securities regulators appear especially focused on addressing misleading claims in retail-oriented products and materials. That scrutiny is expected to expand as regulators grow more sophisticated in evaluating ESG and sustainability efforts, including in private markets and institutional offerings.
Asset managers should continue to take inventory of the where and how ESG and sustainability claims appear across their materials. Applying a critical eye to marketing materials, public claims, and policy language should involve both compliance and ESG personnel, as applicable, and may require additional training for compliance and legal teams.
How We Help
Our dedicated ESG advisory and analytics team helps firms of all sizes build and monitor ESG programs to mitigate risk, ensure compliance and grow responsibly—while protecting against greenwashing.
Our ESG data and analytics solution, Ethos, enables clients to understand and align to client/investor preferences, build metrics programs, track progress, and stay ahead of evolving ESG regulations.
Contact us to learn how we can support your ESG goals, grow your investments, and protect your reputation.