Greenwash is when a bank, investment fund or investment platform exaggerates their positive impact on the world. And it’s rife!
Examples of greenwash include public commitments to reaching net zero carbon emissions or achieving sustainable development goals while continuing to heavily fund and profit from companies causing the problems. Or big shiny sustainability reports that you find out is only about 5% of what they actually invest money or time into.
Financial firms get away with this because we don’t have strict standards and labels in the UK yet. So it’s left up to us to investigate if we want to find the real deal – financial products that don’t profit from suffering or the loss of life.
Here are 6 tips for you, with a focus on pensions and investments
1.Look at their language. Terms like ‘sustainable’ and ‘impact’ are – when you want to do more good in the world – better than ‘ESG’ (environmental, social and governance). The UK Investment Association has clearly defined the differences between these terms so industry should understand and use them. I always use the example of tobacco to illustrate why ESG isn’t sufficient as a ‘positive’ investment. A tobacco company can have a high ESG score because it, say, uses water efficiently and has a more diverse workforce than peers. But the product still kills people. Aim for more good (impact), not less bad (ESG).
2. Look for whether the provider – the fund manager or investment platform – is committed to positive impact across their offerings or whether only a couple of options are ‘good’ for people and planet. That will give you a sense of how seriously they take limiting harmful investments.
3. Unless it’s obvious, ask for a list of every company the fund, pension or platform invests in. Not just the top 10. Many firms aren’t used to this request so they may not have this in an easy to read format at first. There could be a HUGE list of companies. But that’s their problem not yours. You have a right to access this information.
4. Ask how they prove their positive impact. What’s the evidence? This might be easier for those directing money straight to companies and projects than those who buy shares on a stock exchange.
So in that case, a good place to start is to …
5. … ask for their company engagement and voting records. I.e. if and how they use their shareholder powers to influence change within companies?
Keep in mind that it isn’t just voting on existing shareholder proposals, but whether they actively submit their own proposals to make a difference.
If they are voting AGAINST proposals for people and planet ensure they explain exactly why. It is true some proposals might not be very good – so ask why it wasn’t good and what they intend to propose that is better.
Shareaction report on voting records so you can see how some of the biggest investment firms do.
6. There are a whole mix of green, impact and sustainable investment goals and strategies. And not all will suit your interests. So see what the firm or fund talks about most. It could be renewable energy, water, forests, gender, or achieving one or more of the 17 sustainable development goals. There is a fund for almost anyone. So don’t give up too quickly on what you care about.
Let me know if you have any questions! Happy to help 🙂
Tips taken from this May 2022 Greenwash conversation with Ethex, Big Exchange, Ethical Futures, WHEB and Triodos Asset Management.