What is Greenwashing & Why is it a Problem?
Greenwashing is when a company misleads the public into believing they act in a way that is sustainable and has a positive impact on the environment. Greenwashing is a problem because it can confuse Individuals and institutions that may be lead to believe a product is eco-friendly through its advertising materials.
Greenwashing is a marketing strategy to gain more customers and take advantage of the growing demand for environmentally friendly products. The problem is that companies that engage in greenwashing do not back up their claims with facts, metrics or other forms of accountability that show these products are environmentally sound. These claims may include environmental imagery that suggests the company follows sustainable practices that do not exist. They may also use vague green-sounding language, such as “farm fresh” or “natural” , for example, yet the company fails to mention they have sourced raw materials from unsustainable suppliers.
What is Greenwashing in Banking & Finance
In banking and financing, greenwashing is when a company makes misleading statements about its environmental commitments in marketing materials, annual reports, advertisements and other places. A company that engages in greenwashing may make false claims about how its practices beneficially impact the environment. Or a company may market a minor aspect of its product that is environmentally positive and give an unwarranted impression about the entire product or practice.
Some say the ways banks and financial institutions lend, invest and underwrite loans has a huge impact on the planet’s health, so their commitments must go beyond paperless forms and recycling efforts in the workplace. Banks and financial institutions should provide specific proof of the environmental impacts of their practices. Investors should work with trusted advisors who can guide them and select investments that are transparent. A good idea is to check for third-party certification of fossil free or green activities to make sure they are accurate, such as the Forest Stewardship Council or Fair Trade.
How to Identify Greenwashing
There are several key ways to identify if a bank or financial institution does greenwashing. If the marketing materials talk about investing sustainably or considering environmental, social and governance (ESG) risks, read about how they do this. Do they avoid fossil fuels or follow a “low carbon” methodology that allows investments in oil and gas companies? Have they made and reported on environmental commitments you care about or is their annual report a full off environmental imagery, hidden tradeoffs and vague language? If they state that they invest in green bonds, do they also say they follow the Green Bond principles?
Invest Sustainably with Green Century Funds
As you make your investment choices, you may consider making sure to look beyond marketing materials to ensure you know what you are investing in. The prospectus often lists out its’ exclusionary screens and investment approach. The key is to be aware and do a little digging to make sure you are getting what you want. Learning about sustainability can make you aware of greenwashing and lead you to select investments that show proof of their claims.
An investment strategy that incorporates environmental, social and governance criteria may result in lower or higher returns than an investment strategy that does not include such criteria.
Green Century Funds have been investing sustainably since 1991 and we would enjoy speaking with you about our fossil fuel free and other environmentally responsible options. See our prospectus showing screens and investment approach.
About Green Century
°Green Century Capital Management, Inc. (Green Century) is the investment advisor to the Green Century Funds (The Funds). The Green Century Funds are one of the first families of fossil fuel free mutual funds in the United States. Green Century Capital Management hosts an award-winning and in-house shareholder advocacy program and is the only mutual fund company in the U.S. wholly owned by environmental and public health nonprofit organizations.
You should carefully consider the Fund’s investment objectives, risks, charges, and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds please click here, email info@greencentury.com, or call 1-800-934-7336. Please read the Prospectus carefully before investing.
Stocks will fluctuate in response to factors that may affect a single company, industry, sector, country, region or the market as a whole and may perform worse than the market. Foreign securities are subject to additional risks such as currency fluctuations, regional economic and political conditions, differences in accounting methods, and other unique risks compared to investing in securities of U.S. issuers. Bonds are subject to a variety of risks including interest rate, credit, and inflation risk.
This information has been prepared from sources believed reliable. The views expressed are as the date of this writing and are those of the Advisor to the Funds.
The Green Century Funds are distributed by UMB Distribution Services, LLC. 235 W Galena Street, Milwaukee, WI 53212. 4/23. UMB and Green Century are unaffiliated.
