
What ESG Investors Should Know About Greenwashing
Investors want to know that the companies they support share their commitment to certain ideals. But judging a company based on these values can prove difficult. ESG investors can easily fall prey to what’s known as greenwashing, which is when a company deceives the investor into believing they are committed to certain causes and ideals. Learn more about the relationship between ESG investing and greenwashing, so you protect yourself from misleading claims.

- ESG investing is a way of supporting companies that share your beliefs.
- Many companies misrepresent themselves when trying to attract ESG investors.
- Research companies to ensure that they are supporting worthy causes before buying some of their stock.
LESSON CONTENTS
What is Greenwashing?
There’s a new trend in investing known as ESG, which stands for environmental, social and corporate governance. ESG investing has surged in popularity over the last few years, and investors look for ways to support the causes they care about. Many long-time and first-time investors are now trying to evaluate a company’s commitment to sustainability or improving the human condition either on their own or with the help of an experienced financial advisor. However, there’s no gold standard when it comes to ESG. Finding out if a company is socially responsible requires research and a certain amount of discretion.
Greenwashing is when a company makes misleading claims about the nature of its policies and operations to get ESG investors to buy some of their stock.
The market for ESG investing is booming. Many companies are looking to capitalize on this trend using marketing hype without actually changing their policies or behavior for the better.
How to Avoid Being Greenwashed
If you are worried about being greenwashed when looking for companies to invest in, use these tips to identify companies that don’t share your beliefs:
Create Your Own Set of Standards
Comparing the values and ethics of different companies can be hard unless you know what you’re looking for. If you are interested in getting started in ESG investing, start by creating a list of criteria that the company needs to meet before you buy their stock. You might want to focus on one issue at a time, such as climate change, or separate companies into different categories based on the causes they support. Keep in mind, what qualifies as ESG for one person may not work for another.
Research the Company or Plan in Question
If you are looking for worthwhile investments on your own, don’t assume the company’s PR team is telling the truth. Look at qualitative data from a range of different sources to verify whatever claims the company has made. This due diligence may include reviewing social media, speaking to the company’s business partners or reading reviews of their products and services online. Use these factors in combination with ESG ratings to help determine if the company is actually committed to their ESG goals.
If you plan on joining an ESG mutual funds account or robo-investing program, don’t assume the program or asset manager aligns with your values. Research the ESG criteria or technology behind the program to get a better sense of who these companies are and what they represent.
Look for Companies Making a Direct Impact
If you are having trouble managing your ESG funds, look for firms and organizations that make a direct, tangible impact on the environment or society at large, such as donating a portion of their proceeds to worthy causes or reducing their carbon footprint.
Keep these tips in mind when you’re looking at your investment options to avoid greenwashed companies that don’t support your beliefs.
PLEASE NOTE: The information provided is for educational purposes only and should not be considered recommendations or advice. Please consult the appropriate financial, tax or legal professional to determine whether the strategies presented in this article are appropriate for your situation.
Related Resources
View All
How Can I Protect My Elderly Parent's Money?
If you have an aging parent or loved one, it’s important to help them protect their savings and assets from fraud and mismanagement. Elderly individuals with dementia or Alzheimer’s disease may have trouble managing their money. Others may have trouble hearing, seeing or using technology, which can make them vulnerable to online hackers and scam artists. If you are worried about your parent’s ability to manage their finances, take these steps:

Medical Debt: How to Manage and What It Means for Your Credit
An estimated one in ten adults in the U.S. are in medical debt, and millions of households owe more than $10,000. Carrying around this added debt can negatively affect your finances but paying off your medical bills is not as straightforward as paying off other types of debt. You do, however, have options for reducing the amount you owe and when you pay it back. Learn how to manage medical debt to limit its effect on your finances.

What ESG Investors Should Know About Greenwashing
Investors want to know that the companies they support share their commitment to certain ideals. But judging a company based on these values can prove difficult. ESG investors can easily fall prey to what’s known as greenwashing, which is when a company deceives the investor into believing they are committed to certain causes and ideals. Learn more about the relationship between ESG investing and greenwashing, so you protect yourself from misleading claims.

NFTs: What is NFT (Non-Fungible Token)?
There’s a new type of digital commodity on the market. NFTs have been gaining a lot of notoriety among traders, investors, and collectors. So, what are NFTs, and why are they causing such a fuss? Learn more about these unique digital assets and why they’re being called the future of trading.

What You Should Know Before Taking a Loan from Your 401(k)
Your 401(k) is your retirement nest egg. You’ll need that money later in life once you have stopped working. If you need extra cash for an emergency or have trouble making ends meet, you may be tempted to tap into your 401(k) before retiring. After all, it’s your money. But withdrawing from your account before you retire may leave you with less money for your golden years. Keep these tips in mind when tapping into your 401(k).

How to Buy Stocks for the First Time: Know the Basics
You’ve heard about people buying stocks. You’ve even heard about people making a fortune by picking stocks. That sounds great! How do you get in on that? Not so fast. Buying stocks, even for the first time, is straightforward. Making a fortune on them can be harder, but it’s possible to get a nice rate of return without taking on unnecessary risk.

Introduction to Charitable Giving
Philanthropy and charitable giving, once thought to be reserved for the wealthy and the elite, has become a common theme across much of today’s society. Charitable organizations fill a vital niche in our communities. They serve the public and support initiatives that may not be covered by the public or private sector and help create thriving societies and economies. Charitable giving can be both personally and financially rewarding, which is why it’s important to know what your options are so your gift has the biggest impact.

What is Cryptocurrency?
There’s a new form of currency taking the world by storm known as cryptocurrency, or simply “crypto.” It’s a digital form of currency used to purchase goods and services around the world, but it doesn’t behave the same way as traditional cash. Here’s what you need to know about crypto before you invest.

ETFs vs. Mutual Funds: What Makes Them Different
If you’re looking to invest in the stock market, you might be thinking about investing in a mutual fund. But exchange-traded funds (ETFs) have become a popular alternative in recent years. They have many of the same benefits as mutual funds but are usually less expensive than mutual funds. Both options come with their fair share of pros and cons. If you’re not sure which is right for you, use this guide to get started.

What is an IRA and Should I Invest in One?
If you’re getting ready to save for retirement, you may be thinking of opening what’s known as an Individual Retirement Account (IRA). This is a common retirement savings tool to help you make the most of your hard-earned money. There are many different types of IRAs to choose from. Making the right choice all depends on your finances and future plans for your savings.

Plan for Retirement: Know What Steps to Take & When
Planning for retirement should be something you do consciously, not something you put off until later in life. How well you plan for your future will dictate what your life will be like after you reach retirement age.

Maximizing and Getting the Most Out of Your 401(k)
Do you want a 401(k) plan? Does your work offer one? What is a 401(k), anyway? A 401k account is the most popular employer sponsored retirement investment option for tax-deferred savings—it can help secure your retirement. If you are self-employed, freelance, or don’t have access to a 401k account, you can start an individual retirement account (IRA) instead. To maximize the benefits of your plan, you need to be conscious of what’s available to you and stay committed to getting the most out of your 401(k).