Greenwashing

From Open Risk Manual

Definition

Greenwashing in the context of Sustainable Finance is any form of marketing or other communication / disclosure that uses deceptive means to persuade investors, regulators or the public that an organization's products, aims and policies or financial instruments are environment friendly. The term greenwashing was coined by New York environmentalist Jay Westervelt in a 1986 essay.

The rise of greenwashing coincides with increased awareness of sustainability challenges, paired with ineffective regulation and/or definition of what is "green".

Mechanisms

  • Complex corporate structures and/or Financial Products that structurally hide "brown" activities
  • Marketing that exploits known psychological blind spots of individuals (evocative language, suggestive imagery, mental associations etc.)
  • In reporting / disclosures, missing or misleading factual information which may take various forms depending on context:
    • Hidden Trade-offs. (See Also Do No Significant Harm Principle)
    • Lack of Proof / Vagueness. Claims that cannot be substantiated and/or are poorly defined
    • Exaggeration of factually correct claims

See also