Sympathy for the (Greenish) Devil

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I hear greenwashing is on the rise even in developing countries nowadays. Claiming sustainability credentials seems much easier in faraway places where transparency is poor while corrupt officials are not. And it may be difficult to resist those alluring greenium pastures. We have all read by now about a state-owned bank in India issuing a green bond one day just to turn around and help fund a coal mine in Australia the next. Or about Chinese companies financing their ‘clean coal’ projects by issuing green bonds in the local market. Exciting times indeed to be an ESG-focused investor in emerging markets!

Yet is this surge in greenwashing really such a bad thing? Don’t get me wrong; I hate cheating and false pretences as much as the next guy. But let me play the devil’s advocate for a minute, despite knowing that defending greenwashers will probably gain me fewer friends than if I were to take on the case of a serial killer. Call it a temporary case of spring-time insanity (‘våryra’ in Swedish), but I choose to see the rise of greenwashing in emerging markets, at least partially, as a positive sign. A sign that perceptions are changing, environmental issues are getting hot, green is finally in vogue there as well.

- Promotion -

After all, it is not that long ago that the only positive reaction the colour green ever provoked was when associated with those famous American bills[1]. Suddenly, it seems like the fashion gurus’ mantra “No one looks good in green” does not apply anymore. Shouldn’t we applaud this change, even if it attracts some overeager and less honest players? In my mind, investing is and has always been a risky business. It is only fair that insufficient research and sloppy due diligence sometimes leads to losses of money or reputation.

Green used to be the colour of monsters. And, let’s face it, even the nice ones among them, from the Hulk to Shrek, were not known for being attractive. Nowadays, it has finally become irresistible to paint an enterprise with a coat or two of green. Surely it must be a sign that more investors are actively seeking that emerald shimmer for their portfolios.

And maybe a little “fake it till you make it” spirit is not so evil after all. I hear that diamond miners are now nurturing herds of elephants in their very own nature reserves and soft-drink manufacturers focus on replenishing vulnerable water reserves. Should I question the motives behind these noble initiatives, whether saving the planet or putting some glossy green veneer on the corporate façade? As long as they work, I don’t mind.

That said, I salute the tireless vigilantes hellbent on exposing the more blatant instances of greenwashing. If it weren’t for them, cheating one’s way into green heaven would be all too easy.

[1] Fun fact: When paper notes were introduced in 1929, the U.S. Bureau of Engraving and Printing opted to use green ink because the colour was relatively high in its resistance to chemical and physical changes. Also, at the time, green pigment was available in large quantities for quick printing.

 

Picture credit: @darby via Twenty20 / NordSIP

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The coronavirus epidemic has further accelerated the rise of ESG into the investment mainstream. As deficits skyrocket, bond investors have an opportunity to engage with governments on climate change, argues Thomas Dillon, Senior Macro ESG Analyst at Aviva Investors.

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