ESG investing is one of the biggest trends fuelling the market today, but a growing concern for greenwashing is topping the list of worries for many investors.
According to wealth management company Quilter, 44% of investors are concerned ESG-themed funds will fail to live up to their claims, topping out other worries such as fees and performance.
Another study indicates some of their fears may be founded. Nearly three-quarters (71%) of broad ESG funds fall short of their environmental, social, and governance goals.
This comes from InfluenceMap, a non-profit think tank, which studied more than 3,000 companies to assign them a Portfolio Paris Alignment score. This score rates companies according to how well they live up to the goals of the Paris Agreement, with the majority of ESG funds earning negative scores that are misaligned with climate targets.
The SEC promises to tighten regulations that will eventually increase ESG disclosure requirements, but these changes aren't scheduled to appear in any concrete form until next year at some point. Until then, the onus is on your corporation to share your data transparently.
How Can You Minimize Greenwashing Your ESG Data?
Here are some ways to avoid greenwashing that will keep your organization off the naughty list.
Get Advice from an ESG Consultant
ESG consultants can help you tighten your strategic approach to ESG reporting. These professionals advise you on the best way to curate your data so that your investors can consume and compare it easier.
These professionals know how to integrate your ESG initiatives with your overall investor relations program. More importantly, they watch the regulatory framework for ESG compliance carefully to ensure they can communicate your obligations when reporting. Their advice can help you match emerging standards and maintain transparency at every step.
Create an ESG Site
There's no greater way to deliver your ESG data in real-time than with a dedicated ESG website. Your corporate IR website is the most trusted source of information on your brand. That's why the ESG consultants at the investor relations firm Q4 recommend integrating an ESG site into your existing investor relations website.
Q4 has established a set of ESG best practices that standardizes how you communicate your initiatives on your IR site in a structured, engaging way to help you grow investor confidence.
Avoid Generalizations
There are many levels to greenwashing. Besides misaligning with climate targets, it can be as heinous as knowingly making false claims about your efforts to lower fossil fuel consumption, or it can be unintentionally using vague language that leaves your targets and achievements in the dark.
The latter may include token gestures, like saying you use 50% more recycled content than before. This may seem impressive, but it won't make significant climate savings if you only used 1% of recycled materials to begin with.
Experienced ESG consultants advise you to swap out general claims with specific language you can substantiate with numbers. Publishing factual data will reduce your risk of greenwashing until greater standards outline your obligations.
Bottom Line
There's an investing revolution happening as sustainable funds hit new records. As ESG policies become central to your investor relations, the need for transparent ESG data has never been more important.
* This is a contributed article and this content does not necessarily represent the views of sciencetimes.com
