In advance of the 2021 United Nations Climate Change Conference, the head of environmental group Greenpeace raised concerns about attendees “greenwashing” efforts. Greenwashing refers to the practice of intentionally misleading consumers about the environmental benefit of an offering; accusations of greenwashing have become commonplace. Just last month, McDonalds was on the receiving end of climate-related criticism following its announcement of plans to reduce global greenhouse gas emissions by 2050.
Since the term greenwashing was coined in the 1980s, it has largely been championed by the environmentally conscious public. However, the past year has seen regulators, both domestically and internationally, enter the conservation conversation. This uptick in activity is significant; it signals the need for both providers and consumers of reputational due diligence to factor greenwashing into their investigative priorities.
In August, the U.S. Securities and Exchange Commission (SEC) launched an offensive in the fight against greenwashing by opening an investigation into Deutsche Bank’s asset manager DWS. The American regulator wants to know how the German firm factored sustainable investing criteria into its asset management. This investigation is notable in that it represents the SEC backing its series of recent announcements around its intent to prioritize environmental, social, and governance (ESG) matters and climate risks with regulatory action.
2020 also saw significant anti-greenwashing activity across the pond. In March, the initial phase of the European Union’s (EU) Sustainable Finance Disclosure Regulation (SFDR) went into effect. Asset managers subject to EU regulation are now required to be transparent regarding sustainability claims. Required disclosures include policies for the integration of sustainability risk and how sustainability issues factor into activities, including advice to clients and internal decision making. The SFDR demonstrates the EU’s current and future commitment to combating greenwashing.
As the popularity of impact investing continues to rise, so does the incentive for companies in a variety of sectors to capitalize on consumer behavior. Unfortunately, this profit motive encourages malfeasance. Investors seeking to infuse investments with altruism and consumers wishing to align purchases with environmental concerns can reduce their chances of falling victim to eco-hucksters by pairing their passion for sustainability with skepticism.
To keep your investments and deals clear of climate controversy and its accompanying reputational and financial damage, connect with Vcheck Global. Our experienced investigators will cut through media hype and marketing manipulation to infuse your decision making with clarity and confidence.
Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.