Greenwashing concerns holding back ESG investing, IQ-EQ poll says
24 March 2023 Luxembourg
Image: Oleksandr/stock.adobe.com
Almost two thirds of survey respondents are holding back from focusing on sustainability in their investment strategy or from marketing their sustainable credentials due to fears of greenwashing, a recent IQ-EQ study has found.
As investors become more aware of sustainability concerns, managers are being asked to demonstrate how ESG is embedded in funds and must provide evidence to support their ESG-related marketing claims. This can prove difficult, IQ-EQ says, particularly with data and regulatory compliance gaps in emerging markets and SME portfolio companies.
Furthermore, discrepancies between different authorities’ ESG criteria and a lack of clarity around standards has caused gaps in understanding and compliance across the industry, the company says.
Market participants are concerned that strict guidelines, such as those around the labelling of Article 8 and 9 funds, could undermine the regulation’s intentions. IQ-EQ’s poll results suggest that “well-intentioned managers” may pause their sustainability investments as a result of overly complex regulations.
Lyons O’Keefe, ESG director at IQ-EQ, says: “The poll result is concerning, but not surprising. The lack of clarity from global regulators is prompting investors to avoid ESG labelling because of potential repercussions linked to greenwashing.
“Our constant interactions with clients demonstrate that it’s not for the want of trying, as investors are very interested in the sector, however, they fear miscommunication will damage their reputation, or worse. This suggests that clients require additional support to engage in the right way; it’s key that the investment industry does not shy away at this critical time.”
As investors become more aware of sustainability concerns, managers are being asked to demonstrate how ESG is embedded in funds and must provide evidence to support their ESG-related marketing claims. This can prove difficult, IQ-EQ says, particularly with data and regulatory compliance gaps in emerging markets and SME portfolio companies.
Furthermore, discrepancies between different authorities’ ESG criteria and a lack of clarity around standards has caused gaps in understanding and compliance across the industry, the company says.
Market participants are concerned that strict guidelines, such as those around the labelling of Article 8 and 9 funds, could undermine the regulation’s intentions. IQ-EQ’s poll results suggest that “well-intentioned managers” may pause their sustainability investments as a result of overly complex regulations.
Lyons O’Keefe, ESG director at IQ-EQ, says: “The poll result is concerning, but not surprising. The lack of clarity from global regulators is prompting investors to avoid ESG labelling because of potential repercussions linked to greenwashing.
“Our constant interactions with clients demonstrate that it’s not for the want of trying, as investors are very interested in the sector, however, they fear miscommunication will damage their reputation, or worse. This suggests that clients require additional support to engage in the right way; it’s key that the investment industry does not shy away at this critical time.”
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