Feeling brainwashed by greenwashing? Here are some top tips to help you avoid it

With the rise of responsible investment, it can be difficult to navigate the land of ‘green’ or ‘sustainable’ investments.

Unfortunately, with the rise in people wanting to do the right thing with their money comes the increase in investments claiming to be something they’re not – this is known as greenwashing.

If you’re feeling confused or concerned about how to invest responsibly, you’re not alone.

Recent research from Quilter has found that greenwashed investments are the biggest concern for investors looking to invest responsibly, with 44% worrying about the wool being pulled over their eyes when choosing where to put their money.

What is greenwashing?

Greenwashing is not a new phenomenon and can be seen across many different industries. Put simply, it’s an attempt to capitalise on the growing demand for environmentally friendly products.

A genuine ‘green’ investment incorporates factors from the ESG criteria that sit at the heart of responsible investment.

A ‘greenwashed’ investment will falsely claim that a company or its products are environmentally sound. For example, by focusing on ‘green’ projects to create a false impression and detract attention away from less eco-friendly ventures.

You may have seen instances of this in the press in recent years, for example where funds have invested in companies which later turn out to have a reliance on cheap labour in their supply chains or corrupt management teams.

Rosie Hooper, Chartered Financial Planner at Quilter, says:

"The interest in responsible investment has grown considerably in terms of popularity, and it is encouraging to see so many people wanting to make a real difference. Research is showing an increasing demand and investors are clearly adapting their investment philosophies to get the most out of their portfolio, both for themselves and others.

"However, greenwashing threatens to undo all the good work and progress that has been made so far in responsible investing. To ensure fund groups invest in what they say they will, it is important investors hold them to account on this.

"If you are interested in investing responsibly, it is vital you do your homework to understand what it is you are really investing in. Doing the research and finding out how your managers are investing responsibly, what they are holding and how this could make a difference will allow you to make an informed decision and give you the confidence to invest in a responsible manner. Where possible, you should speak to your adviser about your plans and ask them any questions you have to ensure you understand what it is you are investing in."

Here are our top tips to help you avoid greenwashing:

  • Look beyond the tag line

As the saying goes, actions speak louder than words. If an investment is truly ‘green’ they will be able to back up their claims with facts and details.

  • Do your homework

The more information you have, the more confident you will be in making an informed decision when it comes to investing in a responsible manner.

  • Speak to a financial adviser

A financial adviser is best placed to be able to help you find suitable investments based on your personal preferences, values and goals.

Find out more about Quilter’s aim to become the responsible wealth manager on our Responsible Business webpage.

 

As with all investing, your capital is at risk. The value of investments and the income from them can go down as well as up and investors may not get back all of the amount originally invested.