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“All natural”, “Eco-friendly”, “Green” -I’ve seen everything so far. Food, household and clothing businesses are all on a sustainable tide, not just because of their timeless dedication to the environment.
According to the 2019 Accenture Chemicals Global Consumer Sustainability Survey, more than half of the consumers surveyed are paying more for sustainable (recyclable or reusable) products. After all, there is a lot of money to be environmentally friendly.
However, not all businesses are genuine in the pursuit of a cleaner planet or a fairer society. In addition, false or misleading claims about “greenness” can affect investor confidence.
What is greenwashing?
Greenwashing is a misrepresentation of a product, service, or investment and appears to be more sustainable than it really is. Greenwashing includes eggs labeled “farm fresh”, clothing labeled “environmentally friendly”, and investments labeled “green” if these claims are exaggerated or cannot be substantiated. increase.
“Greenwashing is a virtue signal,” says Lina Khan, senior sustainability specialist at construction firm Gensler. “Ensuring that products and services are good in terms of the environment and sustainability is highly valued by society, but I feel that we need to promote more than we actually do. There is also an organization. “
Impact of greenwashing on investment
Environmental, social and governance standards ESG investment, Has grown significantly in popularity over the last few years. ESG standards are a measure of investment sustainability. Unfortunately, greenwashing is on the rise with growing consumer and investor interest in ESG.
This could include some companies, such as oil companies, in funds that investors may not have expected.Critics of ESG and other forms Sustainable investment Marketing tricks and scams. Keep in mind that sustainability is just the trend companies are trying to take advantage of.
One of the reasons greenwashing was able to break through the cracks in investment securities is the large number of ESG data providers. Also, because multiple companies offer ESG assessments, it can be difficult to determine which one to trust.
The Biden administration is calling for better guidelines and standardization for ESG investment. In an executive order in May, the President urged Secretary of Labor Marty Walsh to consider previous decisions regarding the inclusion of ESG funds in workplace severance pay schemes such as 401 (k).
Climate Group is a non-profit organization that helps businesses engage in and implement environmental initiatives. When asked about how greenwashing affects consumer confidence, Vartan Badalian, Climate Group’s North American EV100 Program Manager, says it’s not good for everyone.
“It doesn’t help the planet or business. It brings more distrust to consumers and investors,” says Badarian.
When it comes to ESG investing, greenwashing, or investments that they don’t claim, were the biggest concern for 44% of investors, according to a recent study by Quilter, a UK-based wealth management service. .. Concerns continued regarding ESG investment fees and costs (42%) and ESG investment performance (38%).
While ESG has critics, some champions point out that every level of commitment a company is willing to make to sustainability is better than anyone else.
How to avoid greenwashing
The field of sustainable investment is still relatively new and standardization of the industry as a whole may still take a long time, but there are ways to increase the green of the portfolio (and preferably the wallet).
Kang encourages consumers and investors to do legwork when it comes to learning about a company’s sustainability policy.
“Follow the breadcrumbs,” says Khan. “Look at the report, look at the third-party validation, and do some of your own homework to cross the” sustainability “and” green “taglines. “
ESG fund Usually, we publish impact reports so that investors can see the actual changes that their investments are making. The fund’s prospectus also shows the individual companies that the fund is investing in, so you can see exactly where the dollar is heading.
Some robo-advisors offer for investors who don’t have the time or desire to dive into the essence of their investment Automated ESG investment portfolio..
If you need professional help, you can also work with a financial adviser who holds a Chartered SRI Counselor Certification, a designated program designed to teach Socially Responsible Investment best practices.
And with increasing interest in sustainability, accountability is increasing. Climate Group Badarian said companies are seeing this growing interest and increasing corporate promises as an incentive to abandon greenwashing and keep their promises.
“As climate-related social opinions grow stronger, businesses can’t escape anywhere,” he says. “And with more aggressive policies and political opinions, we will see companies that were once slow moving more aggressive towards their policies, and they are clear about their commitment to climate change. They have to obey because they have a timeline. “