In recent years, Environmental, Social, and Governance (ESG) investing has gained significant attention as individuals and organizations aim to align their financial decisions with their values. ESG criteria evaluate a company’s sustainability practices, social impact, and governance standards, making it an attractive opportunity for investors. However, the rise in ESG-focused investment has also created opportunities for fraud. Scammers exploit the growing interest in ESG by promoting fraudulent investments, greenwashing products, or misrepresenting their commitment to sustainability. Avoiding ESG fraud requires due diligence, education, and awareness of red flags that may indicate deceptive practices.
Misrepresenting ESG practices or outcomes to attract socially conscious investors. This tactic, known as a recovery scam, has also found its way into the ESG space. These fraudsters may pose as sustainability advocates or regulatory agents, claiming to help individuals recoup losses from alleged ESG-related schemes. Once fees are paid, the fraudsters disappear, leaving the victims even more financially vulnerable. Recognizing this tactic is essential to protect yourself and your finances. Remember, legitimate recovery efforts do not require upfront payments or personal financial information.
Another prevalent form of ESG fraud involves greenwashing—where companies falsely market their products or services as environmentally friendly. These schemes often target environmentally conscious investors by exaggerating claims about sustainability initiatives or fabricating environmental certifications. To avoid falling for greenwashing, verify a company’s claims through independent audits, certifications, and third-party assessments. Look for transparency in their ESG reporting and cross-check their public statements with reliable sources.
Investment scams are another common pitfall. Fraudsters may promote ESG-themed investments that promise high returns or exclusive opportunities in emerging markets, such as renewable energy or sustainable agriculture. These schemes often involve high-pressure tactics to secure immediate commitments. To avoid such scams, never invest without thoroughly vetting the opportunity. Research the investment firm’s history, registration, and reviews on credible regulatory websites like the U.S. Securities and Exchange Commission (SEC) or the Financial Conduct Authority (FCA) in the UK. Be wary of unsolicited offers, particularly those that seem too good to be true.
Transparency and documentation are critical safeguards against ESG fraud. Before engaging with any ESG-related initiative, request detailed documentation, such as financial records, environmental impact assessments, and governance policies. Genuine ESG-focused organizations prioritize transparency and readily share evidence of their claims. If the documentation provided is vague or inconsistent, consider it a red flag. Additionally, stay informed about evolving ESG regulations and industry standards to better evaluate claims and spot potential fraud.
Educating yourself and others about the risks of ESG fraud is another vital step. Scammers thrive on ignorance and misinformation, so spreading awareness about their tactics can help others avoid falling victim. Attend seminars, follow trusted industry publications, and participate in workshops on ESG investing to stay informed. Financial advisors with expertise in ESG can also provide valuable insights and help evaluate the legitimacy of potential investments.
By practicing diligence, verifying claims, and staying informed, individuals and businesses can protect themselves from ESG fraud.
By Marilee Crockett
Marilee is a distinguished financial executive with extensive experience in finance, compliance, and due diligence services across various sectors. As the Chief Investment Officer at Brilliant Minds Group Exit Club (BMG Exit Club), she brings a wealth of expertise in fund compliance, regulatory reporting, and risk management to help ensure comprehensive due diligence processes.
Marilee is the Founder and Director of Crockett Investigations, a licensed private investigations firm specializing in investment KYC/AML and enhanced due diligence for startups, General Partners, and Limited Partners. During her career, she has been instrumental in facilitating thousands of Regulation D 506(b) investments, collaborating with strategic partners, General Partners, Limited Partners, including private clients who are high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs).
Concurrent to her role at BMG Exit Club, Marilee is a special manager and U.S.-based agent at Crockett Global Consulting for international Venture Capitalists investing in U.S. startups.
Marilee’s career includes significant experience in the financial sector, having conducted due diligence, AML/KYC, and international financial crime investigations for two of the United States’ largest banks. She also served as President of Crockett Energy Consulting in Dallas, Texas, contributing to the development of the Environment Education Center in Plano, Texas.
Marilee holds Bachelor’s and Master’s degrees from Brigham Young University in Provo, Utah. Her multifaceted experience and commitment to excellence position her as a pivotal leader at BMG Exit Club, where she continues to drive innovation and uphold the highest standards in investment management.
Marilee has lived in eight states and two foreign countries. She currently resides in the Salt Lake City metro area. In her personal time, Marilee works in the film industry, plays the violin, and enjoys spending time with her family. She is the mother of seven grown children and has eleven grandchildren.