A long watch.  

The second of our Hot Topic virtual events covered the concept of ‘greenwashing’, with those close to ESG funds suggesting that the industry still has much to do to prove its worth.  

Hosted by JB Beckett, Friday’s discussion kicked off by asking the participants whether or not greenwashing is endemic in asset management, with some surprising answers.  

David Osfield, fund manager at EdenTree, was the first to speak, suggesting that it’s not just a problem in financial services, but for society at large.  

For example, he points to the recent case of oil giant Saudi Aramco, which in April was forced to withdraw its “powering a more sustainable future” advertising campaign after complaints to the Advertising Standard Authority. A study last year found the company had produced almost 5% of all global emissions since 1965.

“The investment industry doesn’t operate in a vacuum, so it’s exactly the same issues here,” said David.  

ETFs under scrutiny

“With my bias as an active manager, we’ve seen numerous ETFs that claim they are sustainable or ESG oriented that invest in oil companies, for example, which is a clear conflict for what investors would be looking for.  

“Fundamentally, it’s damaging to the sector, it’s damaging to the work that we are trying to achieve, and its damaging to our attempts to get to a net zero economy by 2050. Capital is going to the wrong places with the wrong labels”.  

Andrew Parry, head of sustainable investment at Newton Investment Management, stressed that the fundamental problem is that ESG means “many things to many people”.  

“Inevitably there’s going to be some form of greenwashing as we can’t all agree on what good looks like,” he said.  

An abstract acronym

“It’s a problem because of understanding and educating – so don’t use the term ESG. It’s very easy to think we all know about it, but as far as I’m concerned, it’s just an abstract acronym. The survey we did found that only 23% of people actually know what it means.  

“We all get lazy and talk in acronyms and that inevitably leads to confusion of what it means. We have to tackle to find a plain-speaking way of talking about this topic”.  

You can watch the full discussion below (complete with tech gremlins for M&G’s Ben Constable Maxwell), and make sure you join us for a follow up on this topic later in the year.