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.”
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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