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Oh what a tangled web…Greenwashing fosters scepticism amongst private investors

By: George Watson


In the wake of COP-27, climate anxiety is growing and with that comes increased scepticism surrounding ESG investments. Net-zero greenwashing is becoming an unavoidable issue. Growing concerns surrounding greenwashing (that is, firms overstating their environmental commitments), prompted U.N. Secretary General Antonio Guterres to encourage a ‘zero tolerance for net-zero greenwashing’. With the planet expected to warm up by 1.5°c by 2040, and investment in renewable infrastructure becoming commonplace, there is now a critical need for verifiable net-zero commitments, not only for the sake of the environment but also for investor protection and clarity.

In a recent Research in Finance independent study in which we asked 131 private investors about current market sentiment, this scepticism was very much displayed. 69% of investors stated their concern surrounding greenwashing, whilst only 36% of investors believe that now is a good time to invest in ESG. Additionally, 56% of the sample currently view ESG as less of a priority when performance is better elsewhere.

A large contributor to this distrust is the lack of understanding surrounding ESG criteria and regulation. 51% of consumers find ESG investing hard to research, whilst 43% find ESG terminology perplexing – sentiments that are echoed amongst the experts. In the same address, Guterres stated: “The criteria and benchmarks for these net-zero commitments have varying levels of rigor and loopholes wide enough to drive a diesel truck through.”

Levels of greenwashing

It is desperately clear that work must be done to tighten up and simplify ESG criteria, so that businesses are able to demonstrate clearer net-zero commitments, and investors can gain greater confidence in sustainable investing.

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