“Greenwashing” in Investment Intermediation: Investor Protection and the Difficult Role of Enforcement

The term “greenwashing” has been widespread for years and partially addressed in EU and national law from a consumer law perspective. However, the adoption of the EU sustainable finance framework has fuelled the discussion about greenwashing from an investment point of view and financial regulation’s perspective, also supported by the recent mandate assigned in this regard to the ESAs. The present contribution aims at shedding light on greenwashing from a financial regulation point of view, providing a first legal classification of the potentially relevant behaviours and addressing the most important legal issues surrounding it, also making reference to recent practical cases. While the scope of the analysis is in principle gigantic (e.g. banking, investment, insurance segments; considering as potential defendants issuers, fund managers, advisors, ESG rating agencies, etc.), for the sake of time and accuracy, this paper will focus on the investment field and, in particular, on greenwashing realised through investment intermediaries, specifically investment fund managers and investment advisors. These have been traditionally assigned a role as gatekeepers and relevant duties to protect investors’ financial interests (as well as targeted by the first sustainable finance frameworks: the Sustainable Finance Disclosure Regulation – SFDR – and review of MiFID II delegated acts). In this regard, the paper will assess, also in a comparative law perspective and through reference to practical cases, whether private enforcement by investors of traditional and sustainable finance legislation can represent an effective tool to address greenwashing or whether other tools – including public enforcement – are preferable.