Under Pressure: CEO Resigns Over ESG!

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Under Pressure: CEO Resigns Over ESG!

A hot topic in the current legal press is Economic Social and Governance. A recent development in the area of ESG has been the resignation of the DWS Group Chief Executive Officer. In an eye-opening statement which was released into the public domain on 1st June 2022, the CEO announced his intention to vacate his position and attributed the decision to do so as directly emanating from the pressure he felt from the ‘burden’ placed upon his position and the business itself, especially over various allegations against the business.

It had previously been asserted that the business had neglected its duties to comply with its Economic, Social, and Governance duties. Several claims had been submitted against the organization in this regard and it seemingly did not make for happy reading for those involved in the business. There were claims submitted that the organization had been purporting to comply with its ESG obligations known as ‘greenwashing’. All appeared to be fine on the surface level until news emerged of a regulatory raid by the authorities which appeared to be linked to an inquiry related to the alleged assertions of greenwashing.

The origins of the CEO’s resignation can be traced back to August 2021 whereby the person responsible for sustainability claimed that the business was indulging in ‘greenwashing’. She alleged the company was exaggerating statements that it was implementing ESG measures. The accusations were so serious that the matter was the subject of investigations in the United States of America and Germany. After the inquiry it discovered that whilst ESG issues were considered, a major drawback was the fact that it appears to have been considered in only a small proportion of the matters dealt with by the company. Another observation made was contained in the businesses’ prospectus which stated that ESG factors were a top priority. However, this could not have been the case as ESG appears not to have been considered.

What Impact Did The Assertions Have?

The effect of the assertions was incredibly damaging. This was shown by a share price fluctuation. There was a seemingly correlative and causative relationship between the raid by the regulator between 31st May 2022 and 1st June 2022 and the major share price reduction. In context, this decline was just shy of a seemingly staggering 10 percent in a mere period of one day.

So What Are Greenwashing and What Are The Signs?

Many people may be an unaware relatively new concept of greenwashing. So…What is it? The term greenwashing is the action of a business on the surface purporting to have comparatively strong green credentials compared to the actual reality of the situation. The situation is potentially damaging to large and small businesses and should not be treated trivially because in the modern commercial world ESG issues are treated seriously and are a hot topic. An example of behavior indicating greenwashing is where the name given to the organization does not match its real activities. This will be important in the future of the business world. 

How Can Businesses Avoid Similar Accusations?

External and in-house lawyers should be advising clients to mitigate the risk of greenwashing claims by emphasizing the importance of ESG in the future business world, checking their statements to see the extent they claim to comply with their obligations under ESG and encourage them to communicate with the public directly about how its ESG responsibilities are being complied with. Businesses may benefit from honestly highlighting to the public where they have shortcomings in ESG and showing real-world examples of where they are working to improve matters. 

ASSESSING FIRMS

#Allen&OveryLLP #BurgesSalmonLLP #CliffordChance #CMS LeighDay #LinklatersLLP #BakerMcKenzie #Dentons #Latham&Watkins #NortonRoseFulbright #TraversSmith # Ashurst #BryanCaveLeightonPaisner #HerbertSmithFreehillsLLP #OsborneClarkeLLP

THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES 

[SOURCE 1] Soley, Chris et al. – German fund chief resigns over greenwashing allegations – Citywire - 01 June 2022 - German fund chief resigns over greenwashing allegations - Citywire

[SOURCE 2] Kirakosian, Margaryta et al. – German police raid DWS and Deutsche Bank over greenwashing allegations – CityWire - 31 May 2022 - German police raid DWS and Deutsche Bank ove greenwashing allegations - Citywire

[SOURCE 3] Kirakosian, Margaryta – US regulator to investigate DWS over sustainability claims – CityWire – 26 August 2021 - US regulator to investigate DWS over sustainability claims - Citywire

[SOURCE 4] ] Kirakosian, Margaryta – German court dismisses lawsuit against DWS by former sustainability chief – 25 January 2022 – CityWire - German court dismisses lawsuit against DWS by former sustainability chief - Citywire

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