Greenwashing Rears Its Ugly Head

There are environmental, social, and governance funds around the world that are hauling in trillions of dollars in capital every year, but these funds or the companies they invest in may be guilty of greenwashing. Greenwashing is the act of pretending to “go green” by misleading the public or enacting initiatives that are meant for appearances only. Regulators across the globe believe that greenwashers are pulling in funds that reach almost $4 trillion by the end of the third quarter. Unfortunately, penalties for greenwashing are either nonexistent or ineffective. Erik Thedeen, head of Sweden’s financial markets watchdog, said, “setting regulatory and supervisory expectations is therefore fundamental to addressing issues relating to risk management and greenwashing.” As part of the changing landscape, regulators are planning to set new rules for how ESG ratings are created, how eco-friendly or “green” claims are marketed and if those businesses keep their promises. With the changes, it will be easier for regulators to punish those accused of greenwashing in the future.