Greenwashing and sustainable finance #1

I start a serie of posts on greenwashing with a discussion on its definition and a proposal of concrete tool for action.

6 days ago, there was the closing of the #callforevidence of #EBA #ESMA #EIOPA on greenwashing. I actually decided not to reply as I felt the frame was too wide. “Qui trop embrasse mal étreint” says the French proverb “grasp all lose all??. The main question I had in mind reading the questionnaire was : what is exactly greenwashing ? And then : what is sustainable finance ?

The way you answer the question is crucial. If everything is greenwashing (reminding us the “everything is political”), it means that any “misleading advertising” of green finance is greenwashing. Then regulation should be everywhere in green finance and then take it out of finance, as no fund could be considered as green. This possibility is identified by Ladislas Smia in his post on this issue or by Jean-Benoit Gambet in his post on greenwashing for insurance products.

Such definition might become an impasse for green finance. I do believe that misleading advertising exists and has always existed in green finance. I wrote myself in a book in 2007 that “sustainable finance is a ridge path between two abysses, the bureaucracy of the void and marketing of despair”. And it should be treated as misleading advertising as #BAFin already did, with #DEKA for instance.

Greenwashing is something different, referring to the way issuers and investors contribute (or not) to the environmental and social transition through the sound use of regulations. This definition is based on the European understanding of sustainable finance, where #ESG criteria are the tools to lead a more sustainable investment and then to a more sustainable society. It is different from the US understanding where #ESG are just marketing criteria to rebrand investment choices, without little connection to sustainability (ass explained by Julian K?lbel in its last post).

Greenwashing is the way communication between companies, investors and citizens (as such and as asset owners) is marred by strategic interest of companies and investors to distort the authentic communication needed to achieve a path towards sustainable societies (also called organised transition, by the #NGFS). There will be no organised transition if the level of greenwashing is too high. Such a definition has higher ambition than the correction of commercial communication and it enables to focus greenwashing survey on two key points in this informationn chain from companies to citizens and asset owners :

-?????????corporate disclosures by issuers

-?????????disclosure of funds towards clients

These two processes have started to be regulated, notably through #eutaxonomy for companies, and #SFDR for investors. Hopefully these regulations are still open to progress in their implementation. #CSRD is also a way to improve corporate communication. But we have to understand that there will always be margins for interpretation and greenwashing initiatives from companies. Therefore a research project of #UniversitySorbonneParisNord has been launched to analyse jointly regulations and corporate communications, in order to provide a deep understanding and a clear assessment of greenwashing. The analytical framework is based on #Habermas concept of authentic communication and it provides clear results. Investors could therefore integrate greenwashing from companies in their investment choices and deter greenwashing among companies. And their investment products composition would be cleaned from greenwashing suspicions. Fund disclosures could be also assessed according to #SFDR frameworks.

Among all of of you, dear readers, could any investor be interested in such analysis of its investees ? could any asset owner be interested in the analysis of its invested fund by this tool ?