Greenwashing risk: strategic options for fund marketing

Earlier this year, we hosted an insightful panel session on greenwashing risk at our inaugural IQ-EQ Regulatory Forum. Here, we’re pleased to share the key insights from that discussion in a new whitepaper. 

Despite the introduction of the EU’s pioneering Sustainable Finance Disclosure Regulation (SFDR) in 2021, designed to increase sustainability transparency through enhanced fund disclosures, ESMA issued a comprehensive greenwashing progress report on 1 June 2023 that highlighted a discrepancy between the escalating demand for environmental, social and governance (ESG) funds and the limited availability of sustainable assets, with the risk that managers could adopt competitive and potentially misleading strategies aimed at bolstering their sustainability profiles. In fact, although SFDR was intended to reduce the risk of greenwashing, ESMA’s paper acknowledges that the complex regulation has actually contributed to greenwashing risk in a roundabout way.

Meanwhile in the UK, the Financial Conduct Authority (FCA) will enforce a new rule later this year under its evolving Sustainable Disclosure Regulation (SDR) fund labelling regime. This rule, which was originally set to take effect on 30 June 2023 but has been pushed back to Q4, mandates that sustainability claims made in client communications must align with the actual sustainability profile of the fund, devoid of exaggeration and, crucially, supported by verifiable evidence. Managers will be required to provide evidence of diligent monitoring metrics and the execution of stewardship initiatives relating to any ESG claims featured on their websites.

Given the significance of these developments, IQ-EQ sought the perspectives of industry experts in a panel discussion led by Andrew Shrimpton, Chair of IQ-EQ’s UK Regulatory and Compliance Solutions. This dynamic session, held at the Shard in London in June 2023, saw the gathered experts give their thoughts on greenwashing as well as the newer concept of greenbleaching, discuss how best to rebuild investor confidence in sustainable investments, and share experience-based insight into overcoming the challenge of private market ESG data collection and substantiating sustainability claims at both a fund and portfolio company level.

Panelists:

• Andrew Shrimpton, Chair, UK Regulatory and Compliance Solutions, IQ-EQ
• Lizzie Stazicker, Head of ESG, Exponent
• Hanadi Jabado, Managing Partner, Sana Capital
• Mark Seavers, CIO, Fund Management (Ireland), IQ-EQ
• Lyons O’Keeffe, ESG Director, IQ-EQ

Download the discussion paper