What is GREENWASHING?

Greenwashing refers to the deception of consumers: a product or service is presented as ecological or sustainable, but in reality it is not. After so-called sustainable investment products have brought the financial industrya lot of growth and profit rates for years, there is currently a sense of hangover because the accusation of greenwashing has hit here with full force.

Critical minds are increasingly scrutinising the funds sold as green. They want to know how the eco-social claim of a fund is actually implemented. In the process, embarrassments come to light in many places. One equity fund that declared itself sustainable subjected only 51% of its stocks to the corresponding criteria, the remaining stocks were added unchecked for "stabilisation". A German fund company offered an online "impact calculator" that showed precisely how much CO₂ or how many tons of waste were saved per amount of money invested in their funds. In the small print, it was stated that the calculation was based on rough estimates and that there was no evidence for the corresponding effects. Another fund company fired the newly hired head of sustainability during her probationary period because she criticised the superficiality of its own green products. The dismissed woman defended herself and triggered a court case.

Such excesses have startled a hitherto rather credulous public and prompted the authorities in various countries to bring order into the sustainability jungle. This will lead to a regulatory push, which is already noticeable in the EU, where every sustainable fund must now disclose its approach. In Switzerland, too, the pressure will increase. Even if more regulation means more work and more hassle, the development is welcome: it will bring the sometimes too shrill claims back down to earth. Those who shout "green" must explain what is meant by it and how to act accordingly.

In the sustainability boom of recent years, a certain laziness of thought has taken root and errors have not only been concealed but actively promoted. The fact is:

•     The world cannot be saved by investing in green shares. This is what certain sales brochures suggest. One can make a contribution to positive change with conscious investment decisions, but one should never forget that the connections and causalities are complex.
•     If all Western investors sell their oil shares, not a tonne of CO₂ will be saved. Rather, the falling price makes the share more attractive for investors who have no sustainable intentions.
•     If more than 50% of investment funds in Switzerland now invest "sustainably", this does not mean that the world has become a better place, but rather that the criteria for sustainability have been softened too much.

Since its foundation, Invethos has emphasised the link between investments and ethics. Nomen est omen. On the one hand, we work with the ESG methodology, according to which a company is evaluated in three dimensions - ecology, social and governance quality. But we are able to question the ESG ratings and think for ourselves. If a company is rated poorly simply because it is too small to produce a long sustainability report, we apply our own judgement. Conversely, if a company gets a great rating because it emits little CO₂, but at the same time treats its employees badly, we remain critical. The ESG approach is going in a good direction, but it needs to be understood and developed further. We are staying on it. In addition, impact investments are and will remain important for us: investments that specifically work towards a positive social and ecological impact. In view of the bursting green bubble, what is needed is not cynicism and malice, but innovation and hard work.