globalen
Sustainable Investing Glossary

Greenwashing

Greenwashing is the practice of trying to make people believe that a company is doing more to adopt sustainability than it really is, often for public relations reasons.

Some claim to be more sustainable when they are in fact only making token gestures towards it. For a company, this could be doing something like claiming to have cut a carbon footprint by installing sensors that turn lights off to save energy, when the underlying business is highly polluting. 

For an asset manager, greenwashing could be making a small gesture towards sustainability, such as by excluding an obvious candidate from portfolios like a weapons manufacturer, while not applying environmental, social and governance (ESG) factors to the rest of the portfolio. It could also be the case that if an asset manager has a very small proportion of its total assets under management engaged in sustainability – say 1% - then the other 99% is not sustainable. That is also greenwashing.

As a pioneer of sustainable investing, Robeco has long believed that true sustainability means three things. Firstly, strategies that only apply simple exclusions and are still labeled as being ‘sustainable’ should be a thing of the past. There should be more to sustainable investing than just using a negative screen.

Secondly, a strategy can only really be sustainable if it is also financially sustainable. How do long-term ESG trends and external costs such as climate change, loss of biodiversity and rising inequality lead to changes in business models? This means thinking hard about how sustainability affects companies and investment strategies.

Thirdly, active ownership is important. Truly sustainable investors will use voting and engagement to encourage companies to become more sustainable. Passive funds, for example, cannot do this – they simply scoop up the wheat with the chaff.

To try to make things clearer, and avoid greenwashing, the EU is in the process of defining an ecolabel, so that the public can trust what is said to be sustainable. Other ‘SRI’ labels can be misleading. In Robeco’s view, if a strategy doesn’t have ESG properly integrated, it’s greenwashing.

Creating returns that benefit the world we live in
Creating returns that benefit the world we live in
Sustainable investing
Not all investable trends and themes are about fancy tech innovation
Not all investable trends and themes are about fancy tech innovation
While some of the most attractive trends and thematic investing narratives have to do with technology and innovation, it’s not always the case.
27-11-2020 | Insight
SI Opener: Covid-19 puts spotlight on labor issues in the apparel industry
SI Opener: Covid-19 puts spotlight on labor issues in the apparel industry
The fashion industry has been severely affected by the Covid-19 pandemic due to its discretionary nature, impacting not only garment brands but also their supply chains.
26-11-2020 | SI Opener
Robeco earns ‘leader’ label from Morningstar for ESG
Robeco earns ‘leader’ label from Morningstar for ESG
Robeco has been named by Morningstar as a ‘leader’ for its commitment to ESG.
25-11-2020 | Insight