Investors’ concerns about widespread greenwashing, or misleading environmental claims made by portfolio companies and fund managers, may be overstated, according to a recent report from ratings agency S&P.
The market for ‘sustainable’ investments has grown rapidly in recent years, with higher numbers of investors looking to allocate money according to ESG principles, and more fund managers launching investment products that claim to have sustainable characteristics.
According to S&P, global issuance of sustainable bonds, including green, social, sustainability, and sustainability-linked bonds, could collectively exceed USD1trillion in 2021, a near-fivefold increase over 2018 levels.
Companies are also making more noise about sustainability, with 129 firms on the S&P500 citing ‘ESG’ in their fourth quarter 2020 earnings calls. This is up from only 14 firms that touched on ESG in their Q4 earnings call two years ago.
As ESG concerns become more mainstream for investors and companies and the number of sustainable-labelled products explodes, the challenge of identifying greenwashing grows more pressing.
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