Greenwashing is in Germany primarily addressed by legislation that implements the Regulation (EU) 2020/852 (Taxonomy Regulation) and Regulation (EU) 2019/2088 (Disclosure Regulation) as well as the Directive 2014/95/EU on disclosure of non-financial and diversity information by large companies and groups. The implementation of such EU law has not been concentrated in one specific act but has been spread among a number of laws, e.g., German Investment Code (Kapitalanlagegesetzbuch – KAGB), German Commercial Code (Handelsgesetzbuch – HGB) and the German Securities Trading Act (Wertpapier-handelsgesetz -WpHG). Insofar, as the general approach to greenwashing is not to provide a specific definition of greenwashing or to specifically address greenwashing; instead, it is being made reference to certain requirements under the Taxonomy Regulation and/or the Disclosure Regulation the non-compliance of which might then have legal consequences.

In the following, we outline those statutory rules which we consider as most relevant from a practical perspective:

German Investment Code (Kapitalanlagegesetzbuch – KAGB)

• Identifying greenwashing:
  • Sec. 38 (3) Sentence 2 No. 7, 8: Audit of the annual statements also with regard to the requirements of the Taxonomy Regulation and the Disclosure Regulation
  • Sec. 121 (3) No. 2 lit. g: In the case of investment stock corporations with variable capital, the auditor must also examine whether the management of the assets of the investment stock corporation with variable capital has complied with the requirements of Articles 5 to 7 of the Taxonomy Regulation.
• Sanctioning greenwashing:
  • Sec. 5 (13): Authorization of the German Federal Financial Supervisory Authority (“BaFin”) to enforce the Taxonomy Regulation and the Disclosure Regulation within the scope of the KAGB
  • Sec. 340 (2) No. 24: administrative offense with regard to the requirements of the statements according to Sec. 101 (3) No 7 (inclusion of the information referred to in Article 11 of the Disclosure Regulation and Articles 5 to 7 of the Taxonomy Regulation in the Annual Report for UCITS Special investment fund)
• Other ESG-related provisions:
  
  • Sec. 28a: Additional organizational requirements for the management of development funds
  • Sec. 292a ff.: Special Rules for Development Funds

German Securities Trading Act (Wertpapierhandelsgesetz – WpHG)

• Sanctioning greenwashing:
  
  • Sec. 10 and Sec. 88: Authorization of BaFin to enforce the Taxonomy Regulation and the Disclosure Regulation within the scope of the WpHG ESG-related obligations
  • Sec. 64 (7a): Obligation to provide information according to the Taxonomy Regulation and the Disclosure Regulation -> Greenwashing can give rise to civil liability but so far the non-compliance will not be sanctioned as an administrative offense

Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG)

• Identifying greenwashing
  
  • Sec. 35 (1) No. 9: Audit of the annual statements also with regard to the requirements of the Taxonomy Regulation and the Disclosure Regulation
• Sanctioning greenwashing:
• • Sec. 295 (1) No. 5, 6: Authorization of BaFin to enforce the Taxonomy Regulation and the Disclosure Regulation within the scope of the VAG
  • Sec. 332 (4k): administrative offenses in connection with the Taxonomy Regulation and the Disclosure Regulation
• German Commercial Code (Handelsgesetzbuch – HGB)
  • Sec. 289b-e, 315b-d: reporting duties in the non-financial statements on ESG-related matters
  • Sec. 331 No. 1: Providing inaccurate information in this regard may constitute a criminal offense;
  • Sec. 334 (1) No. 3:Further, non-compliance with the requirements in Sec. 289b (1), 289c, 289d, 289e (2) may constitute an administrative offense

As set out above, greenwashing is not addressed in a specific code but in various acts. In addition to the sanctioning options outlined above, greenwashing can (depending on the underlying facts) be sanctioned as criminal or administrative offense in accordance with general rules, e.g.,

• German Criminal Code (Strafgesetzbuch – StGB) (criminal offenses)
• Sec. 263: Fraud
• Sec. 264a: Investment Fraud
• Sec. 264: Subsidy Fraud
• German Unfair Competition Act (Gesetz gegen unlauteren Wettbewerb - UWG)
• Sec. 5: Misleading Commercial Acts (administrative offense)
• Sec. 5a: Misleading Omission (administrative offense)
• Sec. 16.: Criminal Advertising (criminal offense).

Furthermore, especially with regard to ESG-related matters greenwashing may fall under incorrect presentation in the annual financial statements, in the management report including the non-financial statement or in the separate non-financial report pursuant to Sec. 331 of the German Commercial Code (Handelsgesetzbuch – HGB) (cf. above), as well as incorrect presentation of the Company's circumstances to the Annual General Meeting or to the auditor pursuant to Sec. 400 of the German Stock Corporation Act (Aktiengesetz - AktG).

If ESG-related facts constitute insider facts, criminal and administrative offenses under Sec. 119 and 120 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) in conjunction with the EU Market Abuse Regulation may become applicable. In this context, claims for damages pursuant to Sec. 97, 98 of the German Securities Trading Act may arise.

Civil Claims may arise particularly under tort law (e.g., Sec. 823 (2), 826 German Civil Code – Bürgerliches Gesetzbuch - BGB) or prospectus liability (Sec. 9 Securities Prospectus Act – Wertpapierprospektgesetz – WpPG, Sec. 20 Asset Investments Act - Gesetz über Ver-mögensanlagen VermAnlG) as well as pre-contractual liability.

Liability claims based on greenwashing can, generally speaking, be enforced collectively in Germany (Sec.  1 Capital Markets Model Case Act – Gesetz über Musterverfahren in kapital¬markt¬recht¬lichen Streitigkeiten – KapMuG) and at one place of jurisdiction for all investors (Sec. 32 b German Code of Civil Procedure – Zivilprozessordnung – ZPO).

See above. 

Not applicable.

No. Insofar, the legislator seems to agree with the broad definition provided in Recital 11 of the Taxonomy Regulation.

Greenwashing is a quite (maybe too) complex topic. This starts with the EU legal framework particularly consisting of the Disclosure Regulation and the Taxonomy Regulation and the related annexes. Understanding and correctly applying the ESG rules is such a challenge.

In addition, the directly applicable EU rules are only a part of the legal framework under German law addressing Greenwashing. As already pointed out in our answers to the legal framework, there is not a single code for greenwashing; rather, the relevant rules are spread among various legal acts and concern different legal areas. Thus, it seems to be the main challenge to find a regulatory approach that ensures a harmonized legal framework that provides for clear rules which will be applied not only be the regulators but also by courts and other public authorities dealing with liability claims, criminal charges or claims on the grounds of alleged unfair competition.

Further, the current legal framework on Greenwashing sets high standards on the one hand but does not ensure/make clear how market participants may obtain reliable data to meet the ESG requirements.

Greenwashing und Sustainable Finance | Umweltbundesamt: https://www.umweltbundesamt.de/greenwashing-sustainable-finance#greenwashing-in-der-praxis  

Deutsche Sustainable Finance-Strategie (bundesfinanzministerium.de): https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/deutsche-sustainable-finance-strategie.pdf?__blob=publicationFile&v=16 

BaFin - Acts: https://www.bafin.de/EN/RechtRegelungen/Rechtsgrundlagen/Gesetze/gesetze_node_en.html