Earlier this month our Group Chief Executive and Founder, Brian Pitt, led a panel debate discussing transparency and greenwashing in ESG at the Global ABS conference in Barcelona. The debate was enhanced by the quality of the panel, which benefitted from the insight of European regulators.
While transparency within ESG is improving, it was clear that concerns remain about the risk of greenwashing and the resulting potential harm that investors, seeking to align their ESG goals to purchase strategies, could be misled. It remains the case that greenwashing examples include superficial ESG disclosures, insufficient due diligence on underlying assets, and failure to address significant environmental or social risks.
Regulatory progress remains slow. Earlier this month each of the European Supervisory Authorities published progress reports on greenwashing in the financial sector, but they are not expected to publish final greenwashing reports until May 2024. Only then will proposed changes to the EU regulatory framework become crystalised. In the meantime, there remains an unclear outlook, leaving ESG sensitive investors to take proactive steps themselves to ensure that they are not being deceived by false claims.
In the absence of auditable standards, investors should rely on high quality, truly independent due diligence to assess the authenticity of ESG claims, including verifying the realities of environmental and social impact as well as examining the underlying assets and practices. Insufficient data, weak metrics, or inadequate disclosure can result in increased risks of greenwashing.
We are already helping firms with ESG risk identification and mitigation. If you’d like to discuss our views, learn how we can help you improve your ESG governance, risk assessment and oversight, give us a call.