What ESG Investors Must Demand For Credible Sustainability Reporting
- Media Manager
- Jun 4, 2023
- 1 min read
Forbes
Written By: Dhimitris Lefteri
Published: June 5th, 2023
Greenwashing, a term that refers to making false or exaggerated claims about a company’s ... [+]SOPA IMAGES/LIGHTROCKET VIA GETTY IMAGES
As Environmental, Social, and Corporate Governance (ESG) assets under management have surpassed $35 trillion worldwide, some companies are resorting to greenwashing tactics to attract investment. Unfortunately, such opportunistic behavior undermines the significance of genuine environmental efforts and makes it difficult for investors to assess a company's sustainability practices. As liquidity providers and influential stakeholders, investors have the power to shape corporate sustainability by demanding transparent, standardized and credible collection and reporting of ESG data.
Greenwashing, a term that refers to the act of making false or exaggerated claims about a company’s environmental pursuits, takes many forms. From cherry-picking data and reporting misleading metrics to highlighting minor initiatives while ignoring significant environmental transgressions, corporations are getting creative in their pursuit to disguise themselves as eco-conscious. Most are getting away with it. Worse, even when they are caught, the punishment is often insufficient to deter consumers from purchasing their products and investors from investing in them.
Ratings divergence among these agencies stems largely from incomplete data published by companies. Consequently, there is a lack of standardization in the frameworks that these agencies use to create the ratings since each agency has their own dataset that they were able to capture. Without relative consensus, investors struggle to differentiate between ESG conforming and offending companies. Moreover, corporations can simply advertise the best rating they receive, disregarding their poor scores, and present themselves as environmentally-conscious.
