There’s a new buzzword in town and it’s not Metaverse. It’s greenwashing - aka companies taking advantage of this new green wave and advertising ëco-friendly and sustainable products that are anything but. This kind of reminds me of the term fugazi.
Remember Donnie Brasco, anyone? Anyway, loads of companies are falsely advertising their products and services as eco-friendly in an effort to promote their awareness of their industry’s role in climate change.
Some are even hiding behind certifications (I am personally wary of some of these certifications) while others through soulless “greenspeak” often found in their long and “empty” sustainability reports - a few local beverage names come to mind.
But this is not a “how to spot greenwashing” article, but on the role capital market players can take up in the fight against global warming.
To the uninitiated, let me bring you up to speed; Nine of the 10 hottest years on record have occurred since 2000 with 2014 recorded as the hottest year in 130 years of systematic record-keeping. The reason; increase in the emission of greenhouse gases such as Carbon dioxide (CO2) into the atmosphere. Just for your information, about 45 per cent of the emitted CO2 remains in the atmosphere, with the ocean taking up about 30 per cent and trees and plants the balance.
Primary sources of CO2 (which represents 82 per cent of the total greenhouse gas emissions to the atmosphere) are fossil emissions, deforestation and agriculture.
Roughly half of the CO2 emitted is removed over a timescale of 30 years, a further 30 per cent is removed within a few centuries and the rest will remain in the atmosphere for many thousands of years.
That said, can capital markets play a role in curbing greenwashing? Yes, albeit in a small way as this is a global problem with no easy solutions. Measures may not be immediately impactful but can give a symbolic direction.
One of the ways is for players to demand better and balanced transparency or company disclosure on this issue.
This is because listed companies have a tendency to highlight positive environmental facts about their products while intentionally avoiding any mention of the negative.
For example, a paint company may praise the effectiveness of its environmental management systems while ignoring that its conventional product can make indoor air a chemical cocktail, even long after they have dried, as they continue to release petroleum-based solvents.
Another good example is an energy generating company claiming its carbon credits selling programme is a contribution against global warming.
This is not true. To put it bluntly, the carbon offset market is a bad excuse for buying companies not to take tougher measures to curb climate change. The fundamental question is; would these buying firms have invested in renewable energy if these offset programmes hadn’t existed? How much is the carbon offset programme taking the place of real long-term solutions?
The takeaway. Scientific and empirical evidence of climate change is overwhelming. Global warming is happening beyond any reasonable doubt and the causes are known.
The role of capital markets is clear but there’s a culprit called greenwashing. As an industry, it needs to seriously call on listed businesses to take responsibility and step up the fight, otherwise, we should all “forget about it”.