Using Integrated Capital to Build Community Wealth & Power – March 30th


Understanding, avoiding, and moving beyond it

If you are an investor, business leader, board member, or someone keen to bring about positive social or environmental change, and you see the role of capital and investment as an essential driver of this change, you are likely well aware of the need to make simple statements that people can understand and get behind.​

When it comes to company performance, these statements can be about the past or the future, and they can be based on a whole variety of measurement variables or simply made up, which is a problem.

From an ESG (Environment, Social, and Governance) perspective headline statements and summaries also have a critical role to play. ESG — an investment screening tool that looks at risk to a business rather than the impact the business will have on the world — is of particular note in the USA, where it is being used at the highest levels of business and government as a stick in the ongoing culture wars, whilst in Europe, many regulations are being brought online to mandate disclosure, such as the Corporate Sustainability Reporting Directive (“CSRD”), which was passed by the EU in late December. The directive obliges large and listed companies to report sustainability from the perspective of strategy and business models, in line with the detailed set of disclosure standards developed by the European Financial Reporting Advisory Group (“EFRAG”).

It’s so important to consider on what basis you are making headline claims that you are sharing with your stakeholders, shareholders, or the market.

In all of these cases, whether it’s about business, politics, or community relations, making simple statements people can understand is key to success, and this brings up a major challenge of the modern day: Greenwashing.

What is Greenwashing?

In Australia, the Australian Security and Investment Commission (ASIC) describes greenwashing as:

“…the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable, or ethical.”

In the UK, the government’s October 2021 publication, Greening Finance: A Roadmap to Sustainable Investing, defined greenwashing as:

“…misleading or unsubstantiated claims about environmental performance …made by businesses or investment funds about their products or activities.”

In the EU, the European Commission defines greenwashing as:

“Companies giving a false impression of their environmental impact or benefits. Greenwashing misleads market actors and does not give due advantage to those companies that are making the effort to green their products and activities. It ultimately leads to a less green economy.”

Philip Bateman at desk

No greenwashing here.

Are you an accidental greenwasher?

Good signals you may be straying into greenwashing are if you:

  • Filter everything through a corporate communication, legal, and/or marketing department that sanitizes information and communications on your behalf
  • Knowingly omit material facts and data that you know would negatively impact the performance or perception of your initiatives.

At a deeper level, if you claim to create impact over time without an underlying evidence-based theory of change that’s being measured, validated, and communicated, then as far as we can tell, you’re greenwashing.

Why is greenwashing happening?

There are several leading factors that lead to greenwashing, many of which intersect, such as performance, how impact is measured, and the way impact is communicated.

In Australia, a 2022 RIAA consumer study found that 72% of Australians “are concerned about greenwashing”, and of these, three quarters would consider switching providers “if they found out their current fund was investing in companies engaged in activities inconsistent with their values”.

This speaks to the dangers of greenwashing from a reputational perspective.

Confusion in markets and jumping on a bandwagon

It’s essential to make a distinction between the use of ‘ESG’, ‘impact investing’, and ‘sustainable’ investment products — as these are three different concepts motivated by different factors and they will affect how you structure your measurement, reporting, and management decisions when.

If you don’t know the differences, or you wouldn’t be willing to take a quiz on it against the current regulatory environment, it’s so important to consider on what basis you are making headline claims that you are sharing with your stakeholders, shareholders, or the market.

We need to stop conflating ESG financial risk management strategies with impact, sustainability, or United Nations Sustainable Development Goal (SDG) strategies.

This is particularly urgent considering the huge global swing into ESG-related investments. “We need to stop conflating ESG financial risk management strategies with impact, sustainability, or United Nations Sustainable Development Goal (SDG) strategies. Doing so is causing confusion and exacerbating skepticism and concerns in investment and financial markets,” remarks Fabienne Michaux, Director of SDG Impact at UNDP Sustainable Finance Hub.

Getting it right

Bravo Charlie Greenwashing Report CoverIf you are seriously intending to create positive outcomes in the world and lay claim to them without greenwashing, it’s going to require a well-articulated Theory of Change, knowing what to measure and why, then having detailed, accurate, and ongoing communications. With this in mind, there is a new resource that explores these key elements in depth across three sections:

  1. Greenwashing and its implications within the finance and investment sector
  2. A regulatory overview, plus strategic thinking on impact and measurement
  3. The process and mechanism for creating effective tools for investor engagement

Download the free report by clicking here or the report’s cover image. You can watch interviews with four of the contributors through the links;

Cliff Prior Part 1 – Standards, staffing, clarity and the opportunity of $36 trillion dollars

Cliff Prior Part 2 – Consistency, recession and not being a purist

Kristin Siegel Part 1 – Standing for deeper impact, and real solutions that solve problems

Kristin Siegel Part 2 – The case for measurement, and not letting it get in the way.

Terence Jeyaretnam Part 1 – The causes and impacts of greenwashing

Terence Jeyaretnam Part 2 – The future of corporate and personal responsibility in ESG

Rosemary Addis AM Part 1 – Opportunities, imperfect information & the Impact step change

Rosemary Addis AM Part 2 – Risk icebergs, questions for Directors and Mondiale Impact

Incorporating 14 years ago, my consulting firm Bravo Charlie® has attracted institutional & retail investors collectively holding over $1BN AUM, including one of Australia's largest organic farmers, largest manager of water assets, & leading Impact investor for HNW & family offices. Executive teams & Boards rely on me to support ... Read more
Impact Entrepreneur Premium Members get full, priority access to ValuesAdvisor. A curated database of values-aligned financial advisors.

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