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How to Identify Companies that are Greenwashing

December 20, 2022

In our last two pieces we’ve covered the following:

Now we’re going to dig into something of which all intentional investors should be aware: greenwashing.

The term “whitewashing” has been around for many years and has had several different meanings: from preferring white actors, directors, etc. in the entertainment industry to “glossing over or covering up something that is immoral, illegal, or otherwise bad (as in ‘a book which whitewashes the country’s troubled past’),” its significance is never good.

Recently we’ve also heard the term “sportswashing” – it was thrown around quite a bit when several US professional golfers joined the LIV Golf league (a Saudi Arabian-backed golf tour).

In a nutshell, “Sportswashing is the practice of an individual, group, corporation, or government using sport to improve their tarnished reputation, through hosting a sporting event, the purchase or sponsorship of sporting teams, or by participation in the sport itself.”

Replace “white” or “sports” with “green” and you might see where I’m going with this.

Companies have engaged in greenwashing via press releases and commercials touting their clean energy or pollution reduction efforts. In reality, the company may not be making a meaningful commitment to green initiatives. In short, companies that make unsubstantiated claims that their products are environmentally safe or provide some green benefit are involved in greenwashing.

Investopedia

You can see how this might become a problem when an investor is trying their best to support environmentally friendly businesses.

How can a financial advisor help me with ESG investing?

While many advisors can assist you with ESG investing, it might be worth finding one who specializes in it. Not only will you know that your values likely align with that advisor, but they will also have processes that help you…

  • Identify your values and explain how you can make a difference with your investments.
  • Look at your current portfolio to see if it aligns with those values.
  • Craft a portfolio that does align with you and pinpoint where ESG investing might be a good fit.
  • Research and screen companies or mutual funds to determine if their ESG claims are fraudulent (“greenwashing”).

Are you ready to get started with ESG investing? This 5-minute questionnaire will help you further identify the types of investments that are important to you!

CLICK HERE to take the quiz and get your report!

Socially Responsible Investing (SRI)/Environmentally Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.

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