Sustainability, in its broadest meaning, is crucial for investments today, not only because of its positive impact on an environment in crisis, but also because projects that incorporate the principles of sustainability in their design, implementation and management. ESG (Environmental, Social and Governance) ensure their permanence over time and the return for investors.
On our website we have already talked about millionaire investments that promote sustainable development or special credits for these same purposes,such as what BBVA is doing with transportation on the island of Mallorca, for example.
However, as in several initiatives, ethics is a key factor in their correct implementation, and that is why today there is talk of the danger that “greenwashing ” represents for these investments.
This concept refers to the bad practices of several companies, where environmental responsibility turns out to be more of a marketing promise than a true compliance with standards or a positive impact on the environment.
Whether it is to improve consumer perception or public opinion by disguising practices that are not really environmentally friendly, it turns out that greenwashing today also represents a danger for ESG investments.
More than $25 trillion is managed by pension funds and insurers for green investments and, according to Bloomberg, more than half of the managers of these assets are hampered by a lack of transparency and access to data.
Of course, because in the end these attractive incentives end up falling on projects that have a good disclosure of green policies, but in practice do not meet the corresponding standards.
In this sense, new regulatory frameworks and greater oversight are already being implemented to promote true contributions to sustainable development, which represent the spirit of ESG investments.
Andy Howard, global head of sustainability investments at investment manager giant Schroders, says such efforts “should support real change and enable investors to make informed decisions.
In fact, a Schroders report published in 2019 clearly presented that greenwashing can only be combated through metrics that track performance and not just good intentions:
“The inconvenient truth is that incorporating ESG factors within a portfolio is not easily achieved through simplistic screens and passive approaches, it requires thoughtful and thorough analysis that focuses on a company’s genuine commitment to ESG rather than mere policy disclosure.”
Efforts will then be aimed at strengthening the ability to effectively measure, monitor and manage the ESG factors of companies and projects, to separate the wheat from the chaff and put investment where there is a measurable positive environmental impact.
Of course, the incentive is huge because these types of investments are on the rise, with record inflows of US$81 billion in the third quarter of 2020 alone, according to a Morningstar report.
Thus, with increasing strength and clarity, objective and measurable standards must be formulated to make it easier for organizations and investment projects to manage compliance with these standards.
Another important point is to clearly identify those responsible for verifying compliance with objective and timely evidence, in order to ensure the follow-up of each process, which in turn allows decision making consistent with the organization’s performance.
This requires comprehensive management support platforms, such as Sigea, that make it possible to easily identify the standards to be met, how to manage compliance, distributing responsibility among the different relevant actors in the organization and then identifying and closing the gaps.
Finally, we believe that it is essential to advance in the automation of processes to monitor and alert deviations in a preventive manner, supporting decision makers at all levels and reporting in a timely manner to take corrective actions and take care of both the investment and the sustainability of the project.
Source: Emol.com – https://www.emol.com/noticias/Economia/2020/10/29/1002231/inversiones-sostenibles-lavado-verde.html
Schroders
https://www.schroders.com/getfunddocument/?oid=1.9.3259787
UN
