ClientEarth and the Asia Investor Group on Climate Change (AIGCC) have published a new guide, “Greenwashing and how to avoid it: An introductory guide for Asia’s finance industry”, to help players in the Asian finance sector understand greenwashing issues in the industry.
Greenwashing has the potential to significantly impede the green transition, risking distorting the financial markets and undermining the effective allocation of capital.
Designed with asset managers, banks, and institutional investors in mind, the guide offers practical information to combat greenwashing:
- An overview of emerging forms of greenwashing and the different regulations, guidelines and legal action on greenwashing across Asia and elsewhere;
- Supplemented with selected case studies from leading financial institutions in Asia;
- Recommendations for financial institutions to guard against greenwashing risks.
Speaking at the online launch today, Herry Cho, Managing Director, Head of Sustainability and Sustainable Finance of SGX Group said, “The lack of global consensus and market clarity on claims that are ‘green’ has led to an increase in greenwashing accusations. If left unchecked, it presents long-term risks, and can impede the progress in our urgent fight against climate change.
“Institutions need to reflect on and evaluate their climate governance and communication strategies to ensure transparency of their intentions on climate action – the forward-looking approach of the report is particularly helpful to achieve that.”
Some of Asia’s leading asset owners and asset managers gave their insights at a panel discussion during the event launch. They touched on the central role of green finance in the net zero transition, the challenge and potential liability of greenwashing.
The panellists suggested actions for regulators and the finance sector to combat greenwashing, through enforcing existing laws and developing new regulations.
One of the panellists, Sophia Cheng, Chief Investment Officer at Cathay Financial Holdings, said, “Greenwashing creates inaccurate pricing, an uneven playing field, reduces investor confidence and may lead to misallocation of capital. This guide is a useful starting point for financial actors to apply and take concrete actions to guard against unnecessary exposure to greenwashing risk.”
Another panellist, David Smith, Senior Investment Director at abrdn added, “Greenwashing is a complex and evolving issue in the financial sector. The report launched today identifies the different guidelines and frameworks, such as sustainability reporting frameworks, currently in place in Asia to help recognise and prevent greenwashing.
“While these frameworks are a good first step to help investors understand companies’ plans and actions better, investors also need to assess and engage with companies regularly and proactively to tackle greenwashing effectively.”
Anjali Viswamohanan, Director of Policy at AIGCC and co-author of the guide, said, “Investors active in Asia are ramping up their engagement on understanding climate risks in Asia while also seizing the opportunities associated with climate change and low carbon investing.
“In order to effectively contribute to climate action, there needs to be a clear understanding of what greenwashing is and where concerns may stem from.
“This guide explores case studies of emergent forms of greenwashing, touching upon issues such as transition finance, and provides a set of best practices which financial actors can adopt to minimise the risk of greenwashing.”
Sean D. Tseng, Legal Consultant at ClientEarth and co-author of the guide, added, “This guide comes at a critical time. Despite, or perhaps because of, the increasingly prevalent problem of greenwashing, there is a concerning lack of clarity around how exactly it arises or attracts legal sanction.
“The guide aims to demystify these areas. It also offers some recommendations to help actors in the financial sector avoid greenwashing.
“Ultimately, the hope is that we make green finance that much more genuine, high-integrity and unimpeded – critical components in securing a climate-resilient future.”
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