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Sustainable investment branding: a tool to fight ‘greenwashing’

11 March 2022 5 min read

More investors are aligning profits and purpose in their portfolios with sustainable investment. At the same time, statements about sustainability are being scrutinised for ‘greenwashing’.

Many companies and asset managers struggle to balance sustainability against greenwashing risk

It’s evident that many companies and asset managers have struggled to convert commitment into commonplace. Investor demand has led some to launch ‘sustainable’ products or brands without a real sustainability strategy. This approach has the potential to seriously damage brand reputation if performance does not meet expectations.

Meanwhile, the threat of bad publicity has led many to avoid sustainability altogether — leaving a potentially transformative business opportunity on the table.

This evolving landscape requires careful attention to integrating corporate and sustainability strategies, and transparent communications with investor communities. Companies and asset managers must balance investor demand against potential claims of marketing spin.

In Asia, sustainable investment is attractive but greenwashing risk is real

In Asia, the need for this balanced approach is clear. Over US$100 billion flowed into “ESG” funds across Asia in 2021. Market participants can no longer ignore this opportunity. The potential for greenwashing, however, has been cited as the top barrier to sustainable investment in the region.

Regulatory initiatives may help. For example, the ASEAN Taxonomy will help define sustainability in many sectors as it develops. Unfortunately, a strategy founded on compliance alone is not enough to compete in today’s market.

Sustainable investment branding helps companies and asset managers compete and mitigate greenwashing risk

Sustainable investment branding helps companies and asset managers achieve this balance. This approach goes beyond compliance to unite sustainability strategy, communications and reporting through the lens of brand. The result is a genuine and differentiated approach to creating shared value that investors can trust. A strong brand helps investments stand out in the market and can even prevent claims of ‘greenwashing’ before they arise.

According to Schroders, in 2021 the biggest challenges cited by institutional investors include:

  • Greenwashing due to a lack of clear, agreed definitions of sustainable investment;
  • A lack of transparency and recorded data;
  • Difficulty measuring and managing risk; and
  • Performance concerns.

Sustainable investment branding can address each of these concerns by:

  • Undertaking stakeholder engagement and a robust materiality assessment to focus on the issues that matter, reduce risk and unearth alpha;
  • Integrating corporate and sustainability strategies through the lens of brand to inform genuine and transparent communications;
  • Aligning reporting with standards like GRI, SASB, TCFD and UNPRI to ensure consistency and comparability for investor screening;
  • Implementing robust data collection and quality control processes;
  • Communicating the unique nature of sustainability risks within the broader risk environment; and
  • Reporting and monitoring performance metrics against SMART goals and targets.

Effective sustainable investment branding also requires expertise within a variety of capabilities. This includes understanding the investment’s sustainability profile, market demands, regulation and investor communications. Companies or asset managers without a dedicated sustainability team may lack one or more of these capabilities. Here, external advice can help achieve the fulsome approach needed to build trust among investors.

Investors agree: sustainable investment branding can help

Investors recognize that effective sustainable investment branding conveys real benefits. According to a recent survey, over half of investors believe the best way to tackle greenwashing is to improve “the quality and transparency of fund reporting / fund literature detailing ESG investments and how they will be monitored”. Sustainable investment branding can ensure high-quality sustainability information is communicated to investors in a transparent and consistent way across a variety of communications channels. The approach can align group- and fund-level sustainability reports, socials, website content and more.

With interest in sustainability at an all-time high, companies and asset managers must address sustainability and communicate their approach holistically and credibly to avoid ’greenwashing’. Sustainable investment branding is a comprehensive approach to this issue — converting management of ESG issues from a sideshow to an integral part of their business. Uniting corporate and sustainability strategies, communications and reporting can bring a real advantage to a competitive market.

Louisa Noble
Sustainability Director
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