Greenwashing and Capital Markets: A Comparative Regulatory and Empirical Analysis of ESG Materiality Across the EU and USA

Greenwashing, which is the gap between what firms and asset managers communicate about their environmental, social and governance (ESG) performance and what they actually do, has evolved from a mere consumer-protection sphere into a capital-markets issue as well. Among the various factors shaping investor decisions on capital allocation and risk pricing, ESG information is playing an increasingly fundamental role. The thesis has the objective to examine whether the disclosure of ESG-related misconduct constitutes price-sensitive information, within both the EU and the U.S Regulation, focusing especially on EU’s Market Abuse Regulation (MAR) and the materiality standard of U.S Rule 10b-5. It also questions whether legal and market assessment on materiality always coincide. The study combines three levels of analysis: first, it reconstructs the theoretical and historical background of green finance and greenwashing, together with the EU and U.S market abuse and securities fraud frameworks. Secondly, six enforcement cases were analyzed: Volkswagen, Vale S.A , Eni, ExxonMobil,DWS, and Goldman Sachs Asset Management. These case studies revealed fragmented and uneven enforcement that relies on general rather than ESG-specific provisions. Third, a single-firm event study of Vale S.A (January 2019) and DWS (August 2021) was conducted. The study uses a market model, estimated over 250 trading days and a permutation test, suited to single-firm inference. Both events produced large negative abnormal returns. Over the [-1;+1] window, cumulative abnormal returns were -27.22% for Vale S.A and -14.28% for DWS, with both being statistically significant. Over the [-5;+5] window, the result for DWS result remained significant, whereas Vale S.A did not at 5% level (p=0.0615). In both cases, therefore, market (de facto) materiality converged with the legal (de jure) materiality presumed by Article 7(4) MAR and by the Basic Inc v. Levinson (1988) standard. These two cases do not by themselves establish legal materiality, which must be assessed ex ante; ex-post event-study evidence can nevertheless confirm that the information was price-sensitive (Regulation (EU) No 596/2014, Recital 15). The legal meaning of this convergence differs across jurisdictions: in the United States the price reaction is forensic evidence of reliance, loss causation and damages, while in the European Union it is only evaluative evidence. Finally, the thesis shows that law and markets can diverge mainly in two ways: conduct can be sanctioned but not priced (legal false positives) or priced but not sanctioned (legal false negatives).