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An EU-based asset management company employed a new Group Sustainability Officer. However, she found that the company was vastly overreporting the number of assets it claimed to be ESG. When the Group Sustainability Officer reported her concerns to the organisation’s CEO, she was ignored, belittled and eventually fired. Following this, the company leaked a story suggesting she had been dismissed for incompetence.
However, the whistleblower worked with the financial press to voice her concerns publicly, resulting in a raid by the police on the organisation’s headquarters and the removal of a number of executives.
This anonymised case study shows the importance of implementing a robust internal reporting and investigation process and examines the consequences of retaliation against whistleblowers, which is now illegal.
Background
The whistleblower took on the role of Group Sustainability Officer and, soon after, discovered that the company was making claims about the sustainability of its funds that, in many cases, it could not back up with evidence.
She discovered that a tool the company was using to assess the ESG credibility of issuers was not fit for purpose and was providing inaccurate readings that suggested some funds were compliant with ESG when they were evidently not.
This meant there was a significant gap between what the firm was reporting and the reality. When editing the ESG section of the company’s annual report, the whistleblower found herself having to take out a number of what she termed misstatements and false statements.
At a meeting to discuss the report, the whistleblower made her case for a change of approach in ESG reporting. However, the company’s CEO pointed to the positive press the company had received over its sustainability efforts as a reason to ignore the errors. The Group Sustainability Officer argued that the press reports were only based on misleading information the company had released, but the CEO dismissed her argument.
Soon after, the company fired the Group Sustainability Officer, citing her incompetence. It then leaked the story to a major financial news organisation, hoping to discredit her complaints.
The result
Despite the negative press relating to her time at the company, other figures in the financial press were sceptical of the line from the asset management company and sought out the whistleblower to hear her side. She cooperated with journalists and expressed her concerns about the way that the company reported its ESG credibility. The company continued to deny her claims and discredit her, but her allegations were taken seriously by regulators. Following reports about the company’s flawed reporting and an internal culture in which portfolio managers understood the problems with the framework, but presented a different story to their investors, police raided the company’s headquarters. They were investigating whether the company misled shareholders with greenwashing claims. Following the raid, the CEO departed the company. Soon after, the COO, CIO and Head of Communications all left, with ESG and strategy officials also leaving or being demoted. The organisation has now stopped using its ESG framework and reduced by 75% the number of funds it claims are ESG-friendly. It was also sued by a consumer group over its misleading claims.
How this could have been avoided
The company's reputation was severely damaged by its own actions. Not only was it shown to have been knowingly making greenwashing claims, but its campaign of retaliation against the whistleblower ensured additional bad press. The departure of so many executives and management figures must also have destabilised the business.
Had there been an internal reporting system and a procedure to investigate claims thoroughly, the company could have adjusted its ESG identification processes accordingly without being shown to mislead investors. Instead, the CEO dismissed the whistleblower’s report and continued to allow false information to be transmitted.
By retaliating in the press against the Group Sustainability Officer, the company only increased the scrutiny on its practices, damaging its reputation. In addition, if this were to happen under the new whistleblowing legislation across Europe, which prohibits retaliation against reporting persons, the company would be liable to a punitive sanction.
IntegrityLog is an online platform that creates a confidential and, if allowed, anonymous channel to report misconduct. It keeps your investigation team on track with deadlines and allows you to store reports in-house so that you can deal with issues before they go public and you lose control over the story.
What should have happened
The culture in the business was such that misconduct was widespread and even valued by senior management. The whistleblower clearly felt that reporting internally would be fruitless and so went to the press. This meant that the new management of the company missed an opportunity to manage the narrative. They had to suffer the consequences of the previous board’s activities.
An internal reporting channel, such as IntegrityLog, allows whistleblowers to voice their concerns internally in the first instance and for the business to investigate and stop any wrongdoing found to have occurred. This way, the company is shown to be serious about tackling misconduct. This makes it easy to avoid regulatory sanctions and reputational damage.
To find out how you can streamline whistleblower reporting and investigation, request a demo of IntegrityLog or request a 14-day free trial today.
References and further reading
- Build a speak-up culture
- Create a conduct risk policy
- How to align leadership and compliance
- How to prevent unethical behaviour
- How to write a code of conduct
