With the recent release of the new McDonald’s McPlant burger, the concept of greenwashing has come to the fore of discussions, with people questioning whether vegans want the meat substitutes or whether it is just a form of ‘greenwashing’.
Not only has ‘greenwashing’ become a concern in everyday consumer markets, it has also impacted Environmental, Social and Governance (ESG).
Investing with greenwashing being the “top of the worry list for investors”[2]. A recent study by Quilter concludes 44% of investors were “concerned that ESG investments were not what they claimed to be,” leading to uptake of ESG investments lagging behind the projection that “82% of investors consider ESG data when making investment decisions.”[3]. Lack of regulation surrounding sustainability claims, aspirations, policies and objectives enforcement creates scepticism of ESG investments. While some ESG sustainability statements include quantifiable metrics, most involve “aspirational objectives and commitments” leading to subjectivity. Thus, ESG investment uptake may decrease due to investor concerns that companies may exaggerate green credentials, coupled with the concerns that these investments have higher fees and costs.
Despite greenwashing concerns, there remains hope that ESG investments may continue to increase in the future however with the promotion of regulatory bodies such as the Sustainable Finance Disclosure Regulation (SFDR) or increased third-party regulation from NGOs.
To conclude, currently ‘greenwashing’ has an impact on the uptake of ESG investments due to a lack of knowledge and concerns surrounding lack of regulation. However, with increased cooperation between companies and regulatory bodies these concerns can be mitigated which holds hope for future environmental, social and governance advancements.
Charlotte Turnbull
[1] Sustainability Academy. 2021. ESG Investment. Accessed November 21, 2021. https://sustainability-academy.org/the-power-of-esg-sustainable-investing/
[2] Mark Battersby, “Greenwashing is ‘biggest concern’ for 44% of ESG investors.” International Investment, accessed November 5, 2021, https://www.internationalinvestment.net/news/4031730/greenwashing-biggest-concern-44-esg-investors
[3] Daniel C. Esty and Todd Cort, eds. Values at Work: Sustainable Investing and ESG Reporting – Chapter 13. Cham: Springer International Publishing AG, 2020. Accessed November 6 2021. ProQuest Ebook Central: 196-197