Greenwashing Among Banks, Financial Services Firms Jumps 70%

A RepRisk report finds nearly 1,900 companies linked to a risk incident involving misleading communications.




Misleading communications by companies about environmental, social and governance issues, also known as “greenwashing,” is on the rise, according to a report from ESG research provider RepRisk AG, which highlighted a 70% jump in climate-related greenwashing incidents in the past year among banks and financial firms.

The report focused on risk incidents that could materialize into direct adverse impact on the environment through companies’ operations and was aimed at investors in these companies and activities, such as firms that finance oil and gas activities.

“The association between financial institutions and fossil fuels is widely understood to be high risk, with investors calling for an end to the financing of new oil and gas projects,” the report stated.

According to the report, nearly 1,900 companies were linked to a risk incident involving misleading communications in the past year. Of those, 1,160, or 63%, were associated with the issue for the first time. The report also found that 25% of climate-related ESG risk incidents worldwide are linked to greenwashing, up from 20% a year ago.

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This year’s report also expanded its coverage to include so-called “social washing,” which RepRisk defines as a contradiction between a positive image and an underlying social issue, such as human rights abuses, corporate complicity or child labor. According to the firm, social washing occurs when companies describe themselves in a positive light to protect their reputation and financial performance by obscuring an underlying social issue.

“As with greenwashing, social washing is driven by multiple interconnected factors, which can include changing consumer expectations, increased competition, and an evolving regulatory landscape,” the report stated. “On average, misleading communication surrounding a social issue is 12% more severe than environmental claims, indicating the acuteness of the risk.”

The report added that when both environmental and social issues are involved, misleading communication risk incidents are 20% more severe than greenwashing alone.

RepRisk cited social washing of human rights abuses and corporate complicity within the software and computer services sector, where risk incidents are linked to privacy violations and supply chain issues.

“While sometimes overlooked, data privacy is a human right, and instances of hollow promises of data protection can materialize into adverse financial and reputational impacts for companies, with the global average cost of a data breach reaching $4.45 million this year,” according to the report. “Further, risks related to data privacy can materialize into adverse impacts for the consumer as well.”

RepRisk’s report also found that many companies in travel and leisure conceal human rights issues concerning instances of discrimination and negligence. It added that poor employment conditions are common to the retail and food and beverage industries, notably as they pertain to supply chain issues, migrant labor and salaries and benefits.

However, unlike greenwashing, social washing practices escalate at a slower rate. The report found that the number of social washing risk incidents with no environmental component increased 15% over the past year to September from the prior year, compared with 35% for greenwashing alone.

“The expectation of competitive advantage derived from an image of sustainability has opened the door to green and social washing,” Philipp Aeby, RepRisk’s CEO and co-founder, said in a release. “A lack of accountability around a rapidly evolving landscape of corporate sustainability has helped keep this door open for a long time. Despite this, in recent years, symbolic sustainability has backfired for many, as the media, public, and regulators criticize unfounded claims.”

Aeby added that “banks, asset managers, investors, and other market participants need transparent data on adverse impacts to assess a company’s true business conduct and mitigate green and social washing risk in their portfolios and supply chains.”

RepRisk’s ESG data set dates to 2007, according to last year’s inaugural greenwashing report.

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Investment Firm Pays $2.5M to Settle Allegations It Defrauded Madoff Victim Fund

Austin-based Fulcrum bought recovery rights from Madoff victims, then required them to conceal the proceeds to inflate the payments.



The Department of Justice has settled a lawsuit against an Austin, Texas-based investment firm that allegedly fraudulently obtained payments from the Madoff Victim Fund.  

Fulcrum Capital Partners, which specializes in trading distressed assets, allegedly purchased recovery rights from Madoff fraud victims who had submitted claims to the MVF, according to charges filed by the U.S. Attorney’s Office for the Southern District of New York.

The firm allegedly violated the False Claims Act when it required the Madoff fraud victims to hide the transactions from the fund, as this caused the fund to make inflated payouts to the victims, who then gave the money to Fulcrum.

“Fulcrum is a claim-buying financial firm that never lost a penny from Madoff’s conduct,” Madoff Victim Fund Special Master Richard Breeden said in a release. “After secretively buying claims from real victims, Fulcrum caused others to conceal information from the Madoff Victim Fund with the objective of gaining greater payments for itself.”

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According to SDNY attorneys, Fulcrum bought shares in a Luxembourg-based Madoff Securities feeder fund whose underlying investors incurred losses from Madoff’s fraud. From 2014 to 2019, Fulcrum acquired shares in the feeder fund, as well as Madoff-related recovery rights from three investor groups based in France and Italy.

A Fulcrum spokesperson said: “Fulcrum fulfilled a critical need for victims of Mr. Madoff’s fraud by providing immediate compensation for claims. We concluded that resolving this dispute to avoid the expense and distraction of ongoing litigation was in the best interests of Fulcrum and our limited partners, and we are glad to put this matter behind us and look toward the future. We remain focused on providing liquidity and superior execution services in distressed and special situation markets worldwide.”

The investor groups had previously filed claims with the MVF seeking remission payments for losses they claimed to have suffered from their investments in Madoff Securities through the feeder fund. SDNY attorneys said Fulcrum was aware that the MVF requires all claimants to disclose collateral recoveries received from any other source, including proceeds from the sale of recovery rights. However, the firm allegedly instructed the investor groups not to disclose the payments they had received from Fulcrum.

SDNY attorneys said that because the MVF was required to reduce the claimants’ remission payments by the amount of their collateral recoveries, hiding the payments meant the MVF made inflated remission payments to the claimants, who transferred the money to Fulcrum.

“Fulcrum obtained a fraudulent windfall from the MVF by purchasing recovery rights from Madoff fraud victims, then compelling them to conceal the sales proceeds from the MVF and transfer the resulting inflated MVF payments to Fulcrum,” U.S. Attorney Damian Williams said in a release. “This office will not tolerate lying to the MVF and will continue to pursue and hold accountable those who would use deceptive practices to obtain MVF funds.”

Under the settlement, Fulcrum will pay more than $2.5 million to the U.S., and it has admitted making factual misstatements regarding its conduct, including that it caused inaccurate statements to be submitted to the MVF and that it received amounts from the fund to which it was not entitled.

In 2013, the Department of Justice created the MVF to distribute to victims of the Madoff fraud certain of the forfeited funds through a remission process. The U.S. Attorney’s Office for the Southern District of New York has so far recovered more than $9 billion related to Madoff’s fraud through civil and criminal asset forfeitures.


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