The environmental, social, and governance (ESG) fund industry reached a crossroads on 26 August 2021 when investigations by the U.S. Securities and Exchange Commission (SEC) and by the German Federal Financial Supervisory Authority (BaFin) into allegations that a subsidiary of Deutsche Bank had overstated the claimed ESG integration became public. As a result, ESG marketing jargon morphed into actual regulatory risk with real-world consequences.

In a recently published article by the CFA Institute Neil Scarth explores the background of the investigation and points out the key priorities as well as lessons to be learned from the investigation.