Difference between revisions of "Greenwashing"

From Open Risk Manual
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== Mitigation ==
 
== Mitigation ==
* provision of rigorous and standardised ESG information
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* provision of rigorous and standardised ESG information<ref>Sustainable financial markets: translating changing risks and investor preferences into regulatory action, S.Maijoor, ESMA, 2020</ref>
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==See also==
 
==See also==
 
* [[Glossary of Sustainable Finance]]
 
* [[Glossary of Sustainable Finance]]
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== References ==
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<references/>
  
 
[[Category:Sustainable Finance]]
 
[[Category:Sustainable Finance]]
 
[[Category:ESG Risk Management]]
 
[[Category:ESG Risk Management]]

Revision as of 12:29, 13 October 2021

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". Greenwashing in the financial sector is a subset of more general greenwashing by corporate entities involved in the production of goods or services with a significant environment footprint.

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

Examples

  • ESG Funds falsely portraying themselves as adhering to an ESG Investing (or voting) strategy to attract investor money

Mitigation

  • provision of rigorous and standardised ESG information[1]


See also

References

  1. Sustainable financial markets: translating changing risks and investor preferences into regulatory action, S.Maijoor, ESMA, 2020