How Green is Green?

ESG has become as common an acronym in the world of finance as LOL, DM and IDK are in the world of texting.  But with such notoriety and fanfare comes risks – and in this case that risk is “Greenwashing”.  Greenwashing, the cynical act of providing disinformation so as to present environmentally responsible characteristics, has unfortunately become common place, but there does seem to be light ahead.

 Billion of pounds are flowing into ESG investment products, an industry where total assets in specialist sustainable investing “hit a record of almost $1.7tn in 2020, up 50% over last year” (FT, 10 March, 2021 https://on.ft.com/2PPLheJ).  But how do we guard against the practice of greenwashing?  In our previous post, “ESG and Greenwashing” (https://www.blackheathcapital.com/media/2020/10/19/esg-and-greenwashing) we commented on the introduction of SFDR, the new EU legislation which comes into force today (but not yet introduced in the UK) which is designed as a first step to combat Greenwashing and hold to account the institutions claims around the sustainability of their investments.  In September, we also saw the big 4 accounting firms propose reporting standards for ESG which included issues ranging from emissions to gender and pay ratios (https://www.ft.com/content/16644cb2-f0c1-4b32-b44c-647eb0ab938d).  These I am certain, are only the beginning when it comes to the “policing” of the concept of how green is green. 

Although it is far too early to tell what the impact of these initiatives will be, the battle lines are definitely being drawn.