The issue with greenwashing is that nobody knows exactly what it is as people can think differently about the same thing.
When it comes to defining ethical values and standpoints, there is not a homogenous group of values. We all have our own thoughts and opinions.
However, a general definition of greenwashing is when a company gives the false impression that their products or services are more environmentally sound than they actually are. It is derived from the term ‘whitewashing’ which means to use misleading information to gloss over bad behaviour. If a product or service is genuinely ‘green’ or ‘eco-friendly’ the company should be able to back their claims up with legitimate data.
Greenwashing has become more of a problem in recent years as companies are trying capitalise on the consumers’ desire to be more eco-friendly and environmentally conscious.
The most well-known example of greenwashing is when hotels started to ask their guests to reuse their towels to help save the environment. But people questioned whether it was really to save the environment or to cut the cost of the hotels’ laundry bill.
In terms of finance, greenwashing occurs when companies make unsubstantiated claims about the green credentials of products such as an investment fund. For example, in some instances, we see marketing material embellished with pictures of wind turbines and solar panels, when renewable energy is not a core focus of the fund, in others it might be the inclusion of a fossil fuel producer in a ‘sustainability fund.
There is also a risk of so called ‘Rainbow washing’ where companies try to align their products or services with the UN Sustainable Development Goals.
Why is greenwashing bad?
Greenwashing is unethical as it is misleading to the consumer and could result in them buying, or investing in, a product that they would have otherwise avoided. When it comes to investing, there needs to be clear communication to ensure that the consumer knows exactly what they are purchasing.
How to spot greenwashing?
In terms of finance, that’s where we come in! There is a lot of terminology relating to the ethical marketplace and consumers may feel confused or hoodwinked by clever marketing. The ethics or sustainability of a fund are often in the eyes of the beholder. When we meet with a client, we discuss what ethical investment means to them, so that we can understand what style of investment might be appropriate. We screen all our funds very carefully to confirm their green credentials to make sure that they will align to expectations before we recommend them to our clients. We will ensure that the funds we advise on match your ethical views and beliefs.
One of our partners, Julian, recently took part in a panel for Good Money Week all about Greenwashing. If you missed it, click here to watch the recording.