What is ‘greenwishing’, and how can we stop it?

Coined in 2019 by investment adviser Duncan Austin in his paper ‘Greenwish: the wishful thinking undermining the ambition of sustainable business’, ‘greenwishing’ is defined as “the earnest hope that voluntary sustainability efforts are closer to achieving the necessary change than they really are.” 

Fuelled by good intention, but having little meaningful impact on ESG outcomes, greenwishing is potentially more dangerous than its ill-willed cousin ‘greenwashing’. Both are equally ineffectual; the former certainly harder to challenge.

Quality over quantity

Just last week EY published its annual Climate Risk Barometer survey, which found that though climate risk disclosures are on the up, their quality scores have near-stagnated, or in some regions (including the UK) declined.

Dr Matthew Bell, EY global climate change and sustainability services leader, highlighted the greenwishing trend he is seeing among companies, whereby ambitious targets are set with little to no strategy on how they will be achieved. 

Moreover, the Barometer indicated big issues with reporting; a lack of holistic thinking around climate risk, and a lack of detail in disclosures. The study found only 29% of companies surveyed reported on the impact of climate change in their financial statements. In addition, it said “the majority (54%) of references are qualitative rather than quantitative in nature.” 

The study highlights that companies are struggling to bring disclosure information together in a financially material and meaningful way. While regulatory pressure in the shape of the 11 TCFD (Task Force on Climate-related Financial Disclosures) recommendations is driving disclosure coverage, there is a clear disconnect between these and real-world decarbonisation.

Climate change is in fact accelerating. To stand any chance in achieving the Paris Agreement target of a 1.5°C rise in temperature above pre-industrial levels real progress must be made over the next 12 months. 

Data is the key

In order for this, the survey says, companies must hold themselves to account when it comes to reducing their carbon footprint. It should also be remembered that disclosures are just the start of actioning change. In addition:

  • Decarbonisation targets must be meaningful and thoroughly considered – supply chains included.
  • Once disclosed, climate strategy should be continually reassessed.
  • Policy and science should be closely tracked while performing scenario analysis stress-tests.
  • Be open to the opportunities that arise from decarbonisation.
  • Collaboration is a must; internally, private-public, and company-to-company. Organisations should work with members of their value chains to develop new solutions that will accelerate change.
  • In preparation for increasing investor scrutiny, performance should be tracked in real time. 
Due diligence

We know that climate change is accelerating, and pledges alone won’t stop it. The financial services industry has a vital role to play in financing an energy transition. High-quality disclosures are a key factor in ensuring financial stability, but this is just the beginning of a long road. It’s crucial asset managers carefully analyse fund data and identify limitations, proactively assessing where divestment or engagement is necessary along this journey. Those seeking to do right by investors and stakeholders must communicate data in a robust and transparent way.

We’d love to help. To find out how SI Engage will provide the tools needed to streamline engagement and reporting, and make positive real-world change, get in touch!  

Image credit to Vecteezy.com.

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