The increased popularity of Environmental, Social and Governance investing has led government regulators to question if investing done is actually sustainable or just labeled as such.

ESG investing is investing done on the basis of providing exposure to securities with positive environmental, social and governance ratings. This gives investors an opportunity to build an ethical portfolio.

ESG investing has gained popularity and has been seen by many as an opportunity for corporations to be more socially responsible, however, the criteria for picking ESG securities remain ambiguous.

Rating agencies, research groups, asset managers and other third parties screen companies to determine if the companies fall under their ESG criteria. Since there is no globally accepted benchmark to follow, this screening process creates varying results.

“ESG ratings from different providers disagree substantially,”a study done by the MIT Sloan School of Management, said. This lack of consensus among providers in determining what qualifies as sustainable investing has resulted in contradictions,making it more difficult for investors to determine who is actually practicing what they preach.

This issue has come to the forefront following the termination of Deutsche Bank AG’s DWS sustainability chief, Desiree Fixler. This event has led regulators to question the validity of the asset management group’s ESG criteria.

Fixler claims she was let go after raising red flags about the asset management’s wrongdoing.

“As chief sustainability officer, as a proponent of ESG, how could I not speak up on wrongdoing,” Fixler said in an interview with The Wall Street Journal.

Fixler expressed concerns to the board that there was “no clear ambition or strategy.” The ex- sustainability officer also questioned the ratings that some companies had in actively managed funds such as Wirecard AG, a German financial services company who has had their former CEO, COO and other executives arrested .

“DWS stands by its annual report disclosures. We firmly reject the allegations being made by a former employee. DWS will continue to remain a steadfast proponent of ESG investing as part of its fiduciary role on behalf of its clients,” DWS said in a response to these comments.

Tariq Fancy, BlackRock Inc.’s former chief investment officer for sustainable investing, also expressed concerns about sustainable investing. “Improved ESG data, disclosures, and reporting

standards, though still a work in progress, are a step in the right direction. Europe’s recent clampdown on the definitions of ESG standards is exciting and encouraging,” Fancy said.

During March of this year, the Securities and Exchange Commission announced the creation of the Climate and ESG Task Force. This force will identify ESG-related misconduct as well as “identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules” and “analyze disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies.”