But there’s a fine line between flexibility and ambiguity, and ESG’s critics say some companies and investors are using the loosely defined term to “greenwash,” or make unrealistic or misleading claims, especially about their environmental credentials.
Those criticisms came into sharp focus on May 31, when German police raided the offices of asset manager DWS and its majority owner Deutsche Bank as part of a probe into allegations of greenwashing. It was the first time that an asset manager has been raided in an ESG investigation and signals a moment of reckoning for the industry.
It’s a “real wake-up call,” says Desiree Fixler, the former DWS executive who blew the whistle on her company for allegedly making misleading statements about ESG investing in its 2020 annual report (DWS denies wrongdoing). “I still believe in sustainable investing, but the bureaucrats and marketers took over ESG and now it’s been diluted to a state of meaninglessness,” she says.
On top of the allegations of greenwashing at the industry’s highest levels, there is the impact of Russia’s invasion of Ukraine, which is forcing companies, investors and governments to wrestle with developments that at times appear to pit the E, the S and the G against one another. For example, governments in Europe are reneging on environmental goals by turning to fossil fuels to reduce dependence on Russian gas, in order to fulfil ethical goals.
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Some people wonder whether the term still has any meaning at all. “The acronym ESG is a bit of a confused compact because it muddies at least two things,” says Ian Simm, founder and chief executive of £37bn asset manager Impax Asset Management, a pioneer in sustainable development.
“One is an objective assessment, around risk and opportunity. And the other is around values or ethics. And so people get themselves tied in knots because they’re not really clear about what exactly ESG investing is about.”
Submitted June 07, 2022 at 06:01AM by ThorDansLaCroix https://ift.tt/GFSrgd3
