Greenwashing

As demand for sustainable products and investments has grown, so has the temptation to overstate green credentials. Greenwashing can involve vague claims such as eco-friendly without evidence, highlighting a small green initiative while ignoring a much larger environmental impact, or labelling investment funds as sustainable when their holdings differ little from conventional funds.

For example, a fund marketed as focused on climate solutions might hold large positions in companies with high carbon emissions and little evidence of transition plans.

Greenwashing misleads consumers and investors, and undermines trust in genuine sustainable efforts.

Regulators in several regions have introduced rules to tackle it. These include rules on how sustainable investment funds can be labelled and what they must disclose in the European Union and the United Kingdom, and enforcement actions against firms that misrepresented their environmental practices. Investors can reduce the risk of being misled by checking a fund's actual holdings, its stated methods and independent assessments.