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What is Greenwashing

ESG Investing / Investment

The definition of Greenwashing and it’s impact on society.

What is Greenwashing you might ask? Greenwashing is a phrase people are increasingly becoming aware of. Although the term may sound relatively new, it dates back to the mid-eighties.

In 1986 Jay Westervelt created the phrase to combat the increasing fake news that was around. Slickly produced television adverts and print ads from some of the United States big corporates gave the impression that they were operating Ethically and Sustainably. Several high profile cases demonstrated that this was far from true.

Although the term Greenwashing came about in the 1980s, evidence of the unethical practice dates back to the 1960s. Westinghouse’s nuclear power company produced adverts with claims of cleanliness and safety in its plants. However, before the adverts, Nuclear incidents occurred in two of their main sites. Although their claim of producing cheap electricity was valid, they were far from safe.

Giving the impression that the company had good  Environmental, Social and Governance (ESG) credentials, but in reality, this was far from the truth.

Other major brands have recently been accused of GW. Coca-Cola has recently been tight-lipped that despite producing millions of tons of plastic bottles each year, they have labelled itself as sustainable or environmentally friendly.

How to spot Greenwashing

ESG based investments usually use a set range of criteria to identify if they meet the required Environmental, Social, and Governance factors to be classed as ESG.

Over the last two years, an increasing number of fund launches labelled as ESG funds have occurred.

There are no precise definitions of ESG, and several fund launches have received sceptical reviews on their true ESG credentials.

This makes reviewing and identifying investments with suitable ESG credentials quite difficult.  Some fund rating agencies have launched ESG rating services. However, getting sufficient information to ensure clients receive appropriate investment advice can be difficult. We believe that a specialist discretionary fund manager is best placed to carry out the research. A DFM can pull on multiple resources and knowledge of the sustainable investment market. Their discretionary permissions allow them to change and replace investments within a portfolio to adapt to individual clients specific requirements.

First, there was Green Washing and Now Sports Washing

Greenwashing

As if Greenwashing wasn’t bad enough, companies and even nations are now looking to improve their reputation within sports. The latest example is the sale of Newcastle United to The Saudi  Sovereign wealth fund. The club has now announced itself as the richest club globally; however, concerns about the Saudi track record on human rights have concerned many other countries and institutions for years.

Power of Investors

Arguably the way to change companies attitudes and views on ESG matters is by money. Over the last few years, fund managers have increasingly voted against proposals at several annual general meetings. Investors now have the ability to put their money and investments into companies they believe have the right Environmental, Social and Governance within the business.

The examples covered shows how some companies and nations will go to create the right impression.  This type of exercise has been going on for many years, and it will probably continue for years to come. Investors are increasingly becoming aware of the issues regarding Greenwashing and now sports washing.

What can investors do?

The phrase money talks have become even more relevant in today’s society. Money and investment can be used for the good, and an increasing number of investors are deciding to invest in Ethical and ESG based investments.

Investors are increasingly choosing this investment option. However, it is important to ensure that sufficient research is carried out on sustainable investments to meet the investor’s requirements.

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