Greenwashing under growing regulatory scrutiny

The report examines the rise of ESG (Environmental, Social, and Governance) regulations to combat greenwashing, highlighting the EU's Sustainable Finance Disclosure Regulation (SFDR) as a key driver. It argues that ESG-aligned funds are outperforming non-aligned ones, making ESG compliance essential for accessing global capital. This shift poses a significant risk to fossil fuel-dependent firms, especially in Africa, while benefiting those providing minerals for renewable energy, provided they adhere to genuine sustainability principles.

• The EU Sustainable Finance Disclosure Regulation (SFDR), applied on 10 March 2021, aims to prevent greenwashing by categorizing financial products as sustainable or non-sustainable and imposing rigorous disclosure requirements on asset management firms.
• ESG-aligned investments are demonstrating superior financial performance compared to traditional funds; for example, 94 percent of sustainable indices beat their parent benchmarks in the first quarter of 2020, and the Fondita Sustainable Europe fund yielded a 41.6% return in 2020 while its benchmark lost approximately 3%.
• For firms in African countries, particularly in the extractive industries, access to capital is increasingly dependent on ESG compliance. Companies focused on fossil fuels face a medium-term risk of losing capital and dealing with stranded assets, whereas those extracting minerals for renewable energy technologies are better positioned if they follow ESG principles.
• Greenwashing carries significant financial and reputational risks, as evidenced by the Italian multinational oil company Eni, which was fined EUR 5 million by the Italian Competition and Market Authority for misleading advertising claiming its 'green' diesel had a positive environmental impact.
• The shift toward low-carbon growth and the internalisation of negative externalities—the gap between social costs and private returns—is being driven by global treaties like the 2015 Paris Agreement and the 2017 Sustainable Development Goals (SDGs), as well as the European Green Deal.

APA

Good Governance Africa (2021). Greenwashing under growing regulatory scrutiny. https://digitalmallblobstorage.blob.core.windows.net/wp-content/2021/09/IR-Greenwashing.pdf

Chicago

Good Governance Africa. Greenwashing under growing regulatory scrutiny. 2021. https://digitalmallblobstorage.blob.core.windows.net/wp-content/2021/09/IR-Greenwashing.pdf.

Wikipedia

{{cite report |author=Good Governance Africa |title=Greenwashing under growing regulatory scrutiny |date=24 May 2021 |url=https://digitalmallblobstorage.blob.core.windows.net/wp-content/2021/09/IR-Greenwashing.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{goodgovernanceafrica2021greenwashing, author = {{Good Governance Africa}}, title = {{Greenwashing under growing regulatory scrutiny}}, institution = {Good Governance Africa}, year = {2021}, month = may, url = {https://digitalmallblobstorage.blob.core.windows.net/wp-content/2021/09/IR-Greenwashing.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }