What is Greenwashing and Why Ethical Investors Care

As environmental concerns have become more prevalent, many manufacturers have moved toward providing both sustainable goods and services that meet those concerns. Cleaner and safer products are available because of this demand.

However, some manufacturers want their products to seem “green” without making the necessary investments. These companies resort instead to using clever marketing schemes. 

They give consumers the impression that their products are friendly toward humankind but don’t make meaningful changes in their operations. This is known as “greenwashing.”

What Is Greenwashing?

Greenwashing is any activity, communication, or initiative that takes a socially and environmentally responsible position on an issue to deceive the public into thinking the company is more ethical than it is.

These “green initiatives” allow companies to appear to be engaged in good, not just for their bottom line, but for the planet and its people. In reality, these actions are often few and far between. Organizations also use greenwashing to distract consumers from other issues that might cause concern about the company’s ethical or sustainability efforts.

Why Is Green Washing Dangerous For Investors And Humankind?

Greenwashing takes away from the real progress that humankind is making toward sustainability. The more people become aware of the importance of protecting our planet, the more they will demand truly sustainable products. By spreading false information about how environmentally friendly a product is, companies risk losing customers who want their purchases to reflect their values and beliefs.

Greenwashing is also dangerous for investors because it means that a company may be getting away with making false claims about how “green” their products are. This can lead to lost profits or serious problems if those claims are later found to be untrue.

What Investors Can Do About Greenwashing

  • Assess The Sustainability Policy Of The Fund Manager

Investors can combat greenwashing by asking companies to provide more details about their sustainability efforts. The best way to do this is by asking your company to explain how they’re reducing their environmental footprint and what specific actions they’ve taken.

  • Look At The ESG Ratings Of A Company. 

The highest ESG-rated companies in each sector will likely be the most sustainable ones. “Highest ESG-rated” is a phrase commonly used in greenwashing. However, they might not be in an industry you’d typically associate with ESG, even if they’re top-rated. As a result, consumers looking for sustainable products should seek out transparent companies – radically transparent. Their transparency allows them to reveal what they are doing well as well as how they are trying to resolve any harm they may still cause.      

  • Check The Environmental Record Of An Investment Fund

When it comes to your investment strategy, live the values you preach—mainly if it involves making changes within fund portfolios. Before you invest in a company, you can audit its practices to see if it’s living up to its word. Find out what the company is doing to reduce its carbon footprint. It’s a red flag if they don’t care about the environment.


If you’re an investor, there are plenty of ways to help your portfolio avoid just plain shady investments. By researching the companies you invest in and putting some effort into understanding what they’re saying, you can ensure that your money isn’t going toward a company trying to hide something.

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