How to Avoid Greenwashing and Become a Climate-Conscious Investor | CBC News

There is an increasing demand for eco-friendly investment opportunities among Canadians. However, despite the rising number of companies and funds claiming to be environmentally responsible, a lot of them do not match their commitments.

Experts Suggest Examining Sustainable Investments more Closely.

Nisha Patel wrote an article for CBC News.

, 2023 at 4:00 AM This blog was published on March 19, 2023 at 4:00 in the morning and was last updated on the same day at the same time.

Saarthak Singh and Achint Singh participated in a protest outside of the University of Toronto, where they rallied for the government to take action against climate change. However, they don't just advocate for a greener future in that way. They also intend to invest their money in environmentally beneficial endeavors.

Saarthak Singh stated that climate anxiety has reached unprecedented levels. He asked how he can ensure that he's also contributing positively to the world.

Lots of Canadians are investing in eco-friendly funds with almost $38 billion dollars invested in sustainable options last year. However, it can be tough to find the right investments because some companies and funds say they're environmentally friendly but they're not really.

Achint Singh made a decision to take control of the situation by creating a club that invests in sustainable initiatives on campus. They thoroughly read numerous pages of documents to determine which investments they will endorse.

According to him, the data is not readily accessible and is unclear. It's not something that ordinary citizens can simply discover... The information must be more open and explicit.

He mentioned that creating more accessible means to invest in a sustainable manner will have a widespread impact.

"This will gain momentum and become a larger movement ... businesses will need to start paying heed."

Several corporations and investment funds nowadays acquire evaluations on their environmental, social, and governance (ESG) performance. These ratings originate from different for-profit and non-profit groups like MSCI, Morningstar, and the Global Reporting Initiative.

Saarthak Singh disagrees with the notion that many of the ESG criteria commonly used are sufficiently demanding, and he points out that certain oil companies receive good ratings despite the impact of their operations. He advocates for the separation of ESG categories to effectively evaluate companies and funds based on their environmental activities alone.

"Let's refrain from acknowledging companies that are marketing their carbon emissions, okay?" he remarked.

Those who observe the industry have also expressed concern about greenwashing, a term used to describe corporations or investment funds that claim to be more environmentally conscious than they actually are. InfluenceMap, a research organization focused on climate change, investigated over 700 funds that were promoted using ESG and climate-related keywords in 2021. They discovered that 71 percent of these funds owned companies that did not adhere to worldwide climate goals.

According to the report authored by Daan Van Acker, the measures taken against greenwashing are not enough, and government regulators need to take further action regarding language and labeling.

Currently, there is a lack of uniformity and coherence surrounding the definition and concept of being environmentally friendly," he expressed.

The government at a national level put forth some guidelines for investments that will go green and define the criteria for labeling investments as environmentally friendly. However, these guidelines permit limited allowance for high-polluting activities. They suggested the labeling of oilsands activities as "transition."

The labeling of oil and gas as sustainable has received backlash from environmental organizations who argue that such categorization is nonsensical.

Exploring the inner workings

According to Tim Nash, the president of Good Investing, a company that offers guidance and research for those investing in environmentally friendly options, the field of promoting green investments can feel like an uncharted territory.

It's crucial for Canadian investors to examine the contents of their investments to fully comprehend the fund they intend to buy.

Nash suggests looking into funds such as the Franklin Clearbridge Sustainable Global Infrastructure Income Active ETF. He explains that investors may think it's an eco-friendly investment, but they could be surprised to discover that it actually includes Enbridge.

He stated that in the end, their business is focused on pipelines. He believes that if all companies in the industry utilized the same vocabulary and phrases, it would greatly benefit the industry.

At present, professionals suggest some easy tips to prevent investors from getting deceived by greenwashing:

Nisha Patel has gained vast experience in the field of business and economics as a senior business reporter with CBC News for over ten years now. She has previously lived and worked in various cities, including New York City, Edmonton, and Calgary, before finally settling in Toronto with her charming family of four. Connect with her on Twitter using the handle @nishapatel.

Using information gathered by Laura MacNaughton