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    Your Handy How-to Guide to Effective Greenwashing

    Stockholm (NordSIP) – Alcoholics Anonymous is a good example of a group successfully tackling their own addiction.  However, it turns out self-help is not necessarily the best route for polluting companies or their financial backers.  The pattern that seems to be emerging is the bad guys getting together in the face of external pressure and putting together a self-regulated initiative under a cool acronym.  They then hide behind this while doing one or more of the following:

    1. Focusing on downstream mitigation efforts rather than stemming harmful supply (think recycling, carbon capture, offsets etc).
    2. Setting nice-sounding targets for the short, medium and long-term.
    3. Periodically changing the short-term targets when they cannot be met.
    4. Doing precisely nothing while they get away with it.

    The first cool acronym in NordSIP’s spotlight this week was GFANZ, which is not a hip-hop star but the rather-less-hip Glasgow Financial Alliance for Net Zero.  Project finance does not hit the mainstream news headlines in the same way that listed companies’ activities do.  This means that GFANZ members can effectively dress up as firemen and then show up to your burning house with hoses full of petrol. For more details, check out the report that Reclaim Finance, supported by several other NGOs, just published.

    Yawning gaps in climate engagement efforts

    What about CA100+?  The Climate Action 100+ initiative was launched in 2017 with the aim of focusing investors’ climate engagement efforts on the 100 or so companies that were emitting the vast majority of greenhouse gases (GHG) globally.  The participating investors now number over 700 and represent assets under management of USD 68 trillion.  Given their number, one could hope and expect to see strong results from such a powerful lobby group.  Unfortunately, research published this month by US-based non-profit activist organisation Majority Action indicates that a significant number of signatories are neglecting to make use of this potential leverage.

    The report, titled Fulfilling the Promise 2023: How Climate Action 100+ Investor-Signatories Can Mitigate Systemic Climate Risk, focuses on the voting record of 104 CA100+ signatories considered key based on their portfolio size, level of shareholdings in US-based focus companies and degree of engagement activity.  The analysis reveals that most of these investors ended up supporting company directors in 90% of cases over the past year.  This is not the level of dissent one would expect from supposedly activist sustainable investors engaging with the planet’s worst polluters.  It might be more justifiable if the focus companies were indeed actively transitioning to low-carbon practices, but 17 of these 45 US-based firms were found to have no stated net-zero goals whatsoever (see point 4 above).  Another discouraging statistic shows that the largest CA100+ investors in terms of assets under management in Majority Action’s study were actually tending towards increased support for directors at the focus companies over the past 12-month period.

    CA100+ is a much-needed initiative that is supported by the likes of the PRI and the Institutional Investors Group on Climate Change.  It can only be effective if the financial institutions signing up to it “walk the talk.”  The Majority Action study also shows the important role played by so-called lead engagers, who are expected to set priorities and engagement timelines with specific companies.  They are also responsible for “flagging” key climate related votes on behalf of the wider membership.  The report shows that when this flagging occurs there is a much broader, more concerted response from CA100+ shareholders.

    Plastic Addicts Anonymous

    Our last acronym this week is the unpronounceable AEPW, a.k.a. the Alliance to End Plastic Waste.  This industry self-help group’s stated “core pillars” are infrastructure (for the collection and management of plastic waste), innovation, education and cleanup.  The glaringly absent pillar is “reducing plastic production.”  A quick look at the list of AEPW members raises many red flags: it includes ExxonMobil, Shell, BASF, Dow, PepsiCo, Procter & Gamble and many other top producers of virgin plastics.  AEPW membership boasts eight of the Top 20 single-use plastic waste producers, and most participating firms are also members of the American Chemistry Council (ACC), which lobbied against the establishment of a Global Plastic Pollution Treaty.  By focusing on downstream issues, it appears that the AEPW is seeking to detract attention from and protect the lucrative core business of producing yet more virgin fossil-based plastic.  It is only thanks to the close scrutiny of non-profit organisations like Planet Tracker that the “smoke and mirrors” of these well-funded lobby groups is properly exposed.

    The Greenwashing Monster

    In its latest report published this week, Planet Tracker exposes the many-headed Greenwashing Hydra.  While the European Supervisory Authorities examine the results of their greenwashing call for evidence, they would do well to take a look at Planet Tracker’s monstrous creature, which is sadly far from mythological.  The AEPW is an instance of “greencrowding,” whereby industry initiatives aim to impress through the sheer number of large blue chip signatories and the commensurate potential positive impact.  As we are regularly reminded, this can serve to mask a shocking lack of genuine activity.

    Another head of the hydra is “greenlighting”, which typically means doing something environmentally positive to divert attention from the climate-wrecking core of the business.  “Greenshifting” refers to the common practice of putting the onus back on the individual consumer to change their habits, which is particularly popular with large oil companies.  “Greenlabelling” is the tactic of putting various nice-sounding labels (recyclable, eco-friendly, sustainable etc) on products and services, which do not stand up to scientific scrutiny.  “Greenrinsing” describes point #3 above, whereby companies simply move the goalposts when they look like they will miss their stated targets.  “Greenhushing” is an interesting one, seemingly typified by the recent downgrading of many Sustainable Finance Disclosure Regulation (SFDR) Article 9 funds to Article 8.  Faced with greater scrutiny and much more granular reporting on sustainability claims, some prefer to retreat under the radar rather than be publicly exposed.

    NordSIP’s Laundromat has previously expressed its gratitude to the Sustainability Police that are fighting the good fight against this monstrous green hydra.  Industry involvement is essential to face up to sustainability challenges and make the transition to a low-carbon, circular and fairer global economy.  However, it cannot be solely left to these powerful “self-help” groups.  The expression is “poacher turned gamekeeper” not “poachers stick together to remain poachers.”

    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.

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