Can 'greenwashing' have criminal consequences?

After the search carried out by the Police at the headquarters of DWS (Deutsche Bank's fund manager) in Frankfurt at the beginning of June, due to an alleged case of greenwashing or eco-laundering, searches and queries have multiplied to find out what trafficking, what it is called like that and why they may even raise the question of having committed crimes.

The answer is simple: from a strictly criminal perspective, this is nothing new, beyond the name used, but rather we simply come across cases in which the information given to the investor has been falsified. In this case, making him believe that he was buying something "green" when he really was not. What in jargon is known as misleading information, although in some cases the information is not only inaccurate, but also false. To the extent that inaccurate information refers to environmental aspects or climate change prevention, it is referred to as greenwashing or eco-whitening.

In recent years, there has been an increase in green or ecological financial products, which are part of the progressive introduction of ESG criteria in the different areas of economic activity, in order to achieve more focused companies based on sustainability such as ultimate goal of economic life.

The progressive offer of green products, from financing to different projects and companies, has caused more and more fund managers to appear referring to this issue of green investments, or even refer to ESG criteria (environment, social and governance). ). The information offered by those who manage and sell these products is market information that must be subject to strict criteria, since it may directly affect the planned investment. For example, if a manager of a green fund specializing in companies with a clear compliance with the highest environmental requirements, decides to invest in a company that meets these requirements and incorporates into the fund that manages a significant stake in that green company, and then those environmental demands were not true, your investment will be harmed, and you will have deceived the fund's participants -possibly without knowing it- who thought they were making a green investment, and it turned out that it was a highly or simply polluting company .

If we transfer this simple example to the main investment funds, financial institutions, and fund managers, we find that the fact that such entities are victims or authors of falsifying the information offered to investors can have devastating effects on the market. , causing falls and rises in certain values, simply due to the indirect effect that the lack of environmental compliance of the companies receiving these investments could have on the value of the investments. These effects, due to the obvious connection between the different markets, can cause damage in different jurisdictions, so these are events with global effects and not strictly local ones.

We are precisely in a new facet of the information that is transmitted to the market. If this information is not complete or falsified, it will cause certain damages to investors, third parties or even the company itself. But who will be responsible for such acts?

We are faced with the need to determine responsibilities, will the financial institution respond for the product it sells trusting in the sustainability of the projects it finances or in which it invests, incorporated into the information offered to the investor? Will the fund manager respond? Will the intermediary respond? All these questions do not have a single answer, but the responsibility will always depend on the real participation in the distortion of the information that the natural or legal person had. Yes, because the legal person may also respond to these facts.

Behaviors that could have criminal relevance are crimes that can be prosecuted ex officio -without the need for a complaint by an individual- such as fraud, investment fraud, unfair management, falsehoods; but, in addition, they are also relevant from the point of view of the stock market legislation -administrative- and, of course, also from the civil point of view in claims for damages.

Therefore, we are not only faced with a problem of misleading information to investors or consumers, but it may be cases in which incorrect information is being provided, or in the worst case, falsified, to the market that causes economic damage that must be be determined in each case.

The Spanish authorities will be the ones that will have to analyze the financial products that are being marketed, analyzing their non-financial information statements included in the annual accounts, and all kinds of information provided to the market.

In addition, due to the diverse location of investments and economic operators, as well as the supranational effect of this type of fraud, it could be the case that the German, French or North American authorities also investigate the practices of Spanish companies. A necessary first step to prevent any liability is for Spanish companies to strengthen their compliance programs taking this new risk into account.