Stockholm (NordSIP) – What is the point of the Laundromat? We created the column earlier this year to focus on greenwashing and other forms of sustainability-related laundering. How is this directly relevant to busy institutional asset owners? Companies and industry bodies with vast reach and resources are deliberately muddying the waters to allow the continuation of harmful business-as-usual strategies. These practices translate into multiple risks that may remain hidden within an investment portfolio.
Here are 3 key areas on which the Laundromat sought to shine light over the last year:
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Look beyond the empty promises
One major surprise that emerged from our Laundromat research was the fact that many of the world’s major polluters have seemingly impeccable sustainability credentials. Large companies with the capacity to report to sustainability initiatives are often rewarded for doing so with higher ESG ratings. The problem is that a little digging reveals that they are doing little – or nothing – to change their practices. We looked at the producer of hundreds of millions of “recyclable” Pringles tubes, with an effective recycling rate of only 0.1%. Another culprit in the fashion industry was H&M, who despite a high-profile strategic partnership with the Ellen MacArthur Foundation was being sued for alleged greenwashing. COP27 sponsor Coca Cola promises to “make 100% of our packaging recyclable globally by 2025” while showering the planet with 200,000 new plastic bottles a minute. Creative accounting and devious language is often used in sustainability materials, such as Coca Cola’s “equivalent bottles and cans” or Tetra Pak’s reliance on entirely theoretical recycling rates in its Ellen MacArthur Foundation Global Commitment 2021 Signatory Report.
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Challenge the saboteurs
Many firms are using the time gained by making these empty promises to deliberately work against sustainability policy action behind the scenes. Laundromat examined the Top 25 worst of these, thanks to InfluenceMap’s analysis. Some industry bodies and associations are also coordinating an attack on ESG investment. Asset manager Federated Hermes had to swiftly disassociate itself from the US State Financial Officers Foundation (SFOF) when called out by major Danish pension funds. Climate sabotage also takes place at governmental level, with the Laundromat drawing attention to the appointment of climate sceptics to senior roles in the UK and US.
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Get to know the Sustainability Police
The concept of ESG is increasingly under attack from various parties, partly for political purposes but also as a result of growing greenwashing-fuelled scepticism. The best way to fight back is to improve transparency and accountability, as strongly advocated by the United Nations’ High-Level Expert Group at COP27. Laundromat is grateful for the non-profit organisations dedicated to tracking and exposing the greenwashing bad guys. The information and evidence they provide can inform discussions with external managers and add punch to engagement with portfolio companies. Regulators and policymakers at national and supranational level are also working to clear the waters. We looked at the UK’s efforts to keep pace with the EU’s sustainability framework. An army of NGOs is keeping us focused on the “S” in ESG. Laundromat marked the passage of the World Cup with a look at sportswashing. We were also grateful for the sustainability police’s exposure of the World Cup’s bogus environmental claims.
