Greenwashing and how to avoid it

The document defines greenwashing in the financial sector as false or misleading representations of environmental impact and warns that it can misallocate capital and undermine the Paris Agreement. It outlines five categories of evolving regulation—disclosure, labelling, ratings, taxonomies, and net zero integrity—and classifies enforcement actions into brand, product, financing, and reporting greenwashing. To mitigate risk, the guide proposes 'five pillars' of guarding against greenwashing: screening claims, ensuring transparency, aligning internal actions with public image, monitoring regulatory changes, and adhering to fiduciary duties.

• Greenwashing in the finance industry is defined as the "false, deceptive, or misleading statement / representation of the nature and extent to which a financial product, investment strategy, or company has a positive environmental or climate impact."
• Greenwashing poses systemic risks to the green transition by misallocating capital, hindering fair market comparisons between companies, creating an uneven playing field for genuinely sustainable firms, and reducing overall investor confidence.
• Regulatory and guidance frameworks to combat greenwashing are categorized into five main areas: climate disclosure and accounting, labelling standards, standards on green ratings and criteria, green taxonomies, and net zero integrity standards.
• Enforcement actions against greenwashing are classified into four types: brand greenwashing (overall profile), product greenwashing (mislabelling products), greenwashed financing (funding non-green assets), and financial reporting greenwashing (misleading disclosures).
• The document identifies an emerging 'next frontier' of greenwashing claims, including 'transition-washing' (misaligned decarbonisation objectives), 'greenwashing by association' (intermediaries using greenwashed portfolio companies), and 'greenwashing via offsets' (reliance on voluntary carbon credits).
• To avoid greenwashing, the guide recommends five pillars: screening the accuracy of green statements, being transparent about the integration of green objectives, ensuring internal actions match the public image, monitoring evolving regulations, and remaining alert to legal and fiduciary duties.
• The UN Net Zero Report provides critical recommendations for net zero integrity, including that entities should not invest in new fossil fuel supply or companies involved in deforestation, and should not rely on voluntary carbon credits for interim emissions reductions.

APA

Tseng, S. D., Mallett, D., Viswamohanan, A., & Regalla, M. (2023). Greenwashing and how to avoid it. ClientEarth. https://www.clientearth.org/media/c0ah51z1/v8_clientearth_hires_250423.pdf

Chicago

Tseng, Sean D., Daisy Mallett, Anjali Viswamohanan, and Manisha Regalla. Greenwashing and how to avoid it. ClientEarth, 2023. https://www.clientearth.org/media/c0ah51z1/v8_clientearth_hires_250423.pdf.

Wikipedia

{{cite report |last1=Tseng |first1=Sean D. |last2=Mallett |first2=Daisy |last3=Viswamohanan |first3=Anjali |last4=Regalla |first4=Manisha |title=Greenwashing and how to avoid it |publisher=ClientEarth |date=April 2023 |url=https://www.clientearth.org/media/c0ah51z1/v8_clientearth_hires_250423.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{tseng2023greenwashing, author = {Tseng, Sean D. and Mallett, Daisy and Viswamohanan, Anjali and Regalla, Manisha}, title = {{Greenwashing and how to avoid it}}, institution = {ClientEarth}, year = {2023}, month = apr, url = {https://www.clientearth.org/media/c0ah51z1/v8_clientearth_hires_250423.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }