In the Financial Times, Amy Roy Shares Insights into the Regulation of ESG Credentials in Investment Funds

With regulators hyper focused on greenwashing, asset managers are struggling with the vast grey areas in which to verify the environmental aspects of their products, and make judgements of how to fit funds and their holdings into ESG categories

Amy Roy, partner in Ropes & Gray’s securities litigation practice, told the Financial Times that “now and in the near term . . . a lot of companies that find themselves and their disclosures [to be] a focus of the SEC may ultimately find themselves being used as examples.” “The real harm is the reputational risk,” Roy adds. “ESG is such an amorphous thing. There’s so much in flux right now in terms of definitions, rules and how they apply that everybody is probably in a situation where they are a bit vulnerable.”

The good news for investment firms across the globe is that the prospect of being sued by investors, or any other private party, over ESG disclosures is pretty remote for now. “They [an investor] would have to establish causation,” explains Roy — in other words “that a fund’s share price fall was caused by the alleged misstatement or omission in the fund’s disclosures about ESG.”