Six Greenwashing Tactics that Investors should keep an eye on

Planet Tracker, a non-profit entity that engages with financial institutions to foster change in their investment strategies, published in January 2023 a report warning of six types of greenwashing that investors should not fall for.

Greenwashing refers to a marketing strategy used by companies to make themselves appear more environmentally friendly than they actually are. This tactic is often used to attract consumers and increase sales or raise prices. However, making false environmental claims can hinder the development of the green economy and result in the misallocation of capital. Companies with strong sustainability credentials can attract a valuation premium and lower the cost of capital. Despite this, there are challenges faced by investment managers and financiers such as data gaps, risk of corporate greenwashing, and a lack of globally accepted taxonomies. The IMF's Global Financial Stability Report of October 2021 suggests that greenwashing needs to stop to prevent the perpetuation of poor environmental practices.