- Greenwashing accusations highlight tensions between consumer protection and environmental credibility
- Questions are being asked about whether regulators will punish investors for ‘unintentional’ greenwashing
- EU laws already exist to prevent greenwashing but more are likely to be introduced
The Oxford English Dictionary (OED) defines greenwashing as: “(a) To mislead (the public, public concern, etc) by falsely representing a person, company, product, etc as being environmentally responsible; (b) to misrepresent (a company, its operations, etc) as environmentally responsible”.
Although financial markets rely more on lawyers than lexicographers to understand how regulatory terms are defined, the OED hits on the first dilemma for those trying to navigate ever-strengthening greenwashing rules, and those trying to enforce them: is greenwashing about misleading clients, or it is about making questionable environmental statements?
While the two often overlap, they are not mutually inclusive.
Take the recurring media headlines expressing outrage that some climate funds contain oil stocks. In an article last year, the leading UK taboid, the Daily Mail, accused the managers selling these kind of products of “deceit”, describing fossil fuel investments as ones “that most green investors would otherwise run a mile from”.
But it is widely acknowledged in green finance that meeting the goals of the Paris Agreement will involve owning, and influencing, the economy’s big polluters. The theory of change underpinning these climate funds may be legitimate, even if clients do not expect their money to be used this way.
Jakob Thomä, executive director of think tank 2° Investing Initiative (2Dii), says that this tension is not new.
“In finance we always feel like we’re inventing something, but greenwashing has existed as a concept for decades in the corporate world, and there are already rules and definitions,” he explains, pointing to the European Union’s