From greenwashing to green hushing: the quiet ESG challenge
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From greenwashing to green hushing: the quiet ESG challenge

Some companies overhype their eco-credentials, while others hide theirs. Banks are navigating this complex landscape to capitalize on surging demand for sustainable investment.

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As the world rallies around the fight against climate change, greenwashing – companies overstating their eco-friendliness – has become notorious. However, green hushing, the antithesis of greenwashing, now presents an even greater challenge.

Rather than overstating their sustainability efforts, many companies are actively concealing them.

The Destination Zero report, published earlier this year by Switzerland-based global climate solutions provider South Pole, confirms this, revealing that even the greenest companies engage in green hushing.

South Pole surveyed 1,400 companies across 12 countries. Some 44% admitted that external communication on climate targets has become more challenging in the past year. A full 58% are reducing communications, and 18% have no plans to publicize their science-based targets at all.


Although green hushing is a universal concern, its origins vary across different markets.

In the US, green hushing is connected with a neutral political stance, primarily driven by the Republican Party's anti-environmental, social and governance rhetoric. Sustainability has become a divisive issue and Republican state officials have unleashed a barrage of investigations into banks and asset managers they suspect of being too green, as well as enacting anti-ESG laws and divesting from firms such as BlackRock that advocate for sustainable investments.

The situation is such that Larry Fink, CEO of BlackRock, stated in June 2023 that he would no longer use the term 'ESG' because of its overly politicized nature, even though the firm will continue to focus on climate and social issues.

A wave of asset managers has, consequently, withdrawn from ESG initiatives. Four years after joining the high-profile investor network Climate Action 100+, JPMorgan Asset Management and State Street Global Advisors recently confirmed their departure from the $68 trillion initiative. Additionally, BlackRock has transferred its US participation to BlackRock International, a smaller UK-based subsidiary.

In the absence of clear, authoritative standards for reporting and calculation, many listed companies in Asia have chosen to tread cautiously on their ESG disclosures

This has left the world's largest investor-led ESG network without any of the top five US asset managers.

Despite this anti-ESG fervour in the US, Europe leads the pack in green hushing, according to the South Pole report. A staggering 79% and 83% of Swedish and French companies respectively acknowledge their engagement in the practice.

Bankers attribute this to stringent regulations, such as the European Parliament's new rules approved in January 2024 that prohibit companies from using terms such as "environment-friendly" and "green" in their promotions without clear evidence.

Asia finds itself at the opposite end of the spectrum, where insufficient regulatory guidance, rather than stringent regulation, serves as the primary catalyst for green hushing.

"Across the entire Asian market, green hushing is much more severe than greenwashing,” Wentang Zhong, executive committee member and partner at Infaith Group, a Chinese consulting service provider to listed companies, tells Euromoney.

Wentang Zhong, Infaith Group

“This is due to the regulatory tolerance and deficiencies in foundational capabilities among listed companies, including a shortage of ESG talent and the inadequacies in data statistics and collection methodologies."

In the absence of clear, authoritative standards for reporting and calculation, many listed companies in Asia have chosen to tread cautiously, opting for a more muted approach to their ESG disclosures.

Even as some large firms have boldly embraced market standards, seeking to establish themselves as trailblazers in the region, they too find themselves hesitating at the critical moment of disclosure.

With the future of ESG reporting requirements shrouded in mystery, these companies are left to navigate a delicate balancing act: weighing the potential benefits of transparency against the risks of revealing too much in an ever-shifting regulatory landscape.

Apple clearly illustrates this point. In 2023, the tech firm claimed that the new Apple Watch series had achieved carbon neutrality. The company backed this claim with benchmark emissions data for the cradle-to-grave cycle.

However, environmental organizations publicly questioned the claim, suggesting a risk of "greenwashing." One of the main reasons for scepticism was Apple's decision to stop pushing its suppliers to publicly disclose factory-level greenhouse gas data, making it impossible to verify the product's true carbon neutrality in the production phase.

The data

Despite such issues around disclosure, Asian banks have identified opportunities to capitalize on the growing demand for sustainable investments in the region.

Companies have compelling incentives to disclose ESG metrics, as ESG-labelled debt attracts a wider pool of global investors and typically commands a premium price.

Many banks adhere to local-market ESG indexes, such as those provided by Morningstar or MSCI, to play it safe.

Other banks have taken a more proactive approach to differentiate themselves and defer green hushing. They identify high-potential companies not yet included in ESG indexes and work closely with them to address the factors preventing their inclusion.

By providing guidance on ESG data collection, reporting and disclosure, banks can empower these firms to enhance their ESG performance and attract sustainable financing.

"Banks should not be overly concerned about deliberate data falsification when requesting data from target companies," says one Indonesia-based banker. "Instead, they should provide clear guidance on key data points and calculation standards to ensure the authenticity and accuracy of the submitted data.

"If necessary, banks can also collaborate with local intermediary institutions to verify the data."

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