Invest
ESG is becoming popular but ‘greenwashing’ is a problem
Sustainable investing is back on the radar as a result of the COVID-19 pandemic, but experts warn that better standards around ESG products are needed to mitigate “greenwashing”.

ESG is becoming popular but ‘greenwashing’ is a problem
Sustainable investing is back on the radar as a result of the COVID-19 pandemic, but experts warn that better standards around ESG products are needed to mitigate “greenwashing”.

Environmental, social and/or governance (ESG) factors are now top of mind for investors, with the COVID-19 crisis impacting the way investors view social responsibility and sustainable living.
According to new study survey by CFA Institute, the global association of investment management professionals, 85 per cent of CFA Institute members now take ESG factors into account when investing, up from 73 per cent just three years ago.
Although only 19 per cent of institutional investors and 10 per cent of retail investors currently invest in products with ESG factors, 76 per cent of institutions and 69 per cent of retail investors said they have interest in ESG investing. In Australia, interest is a little lower and sits at 65 per cent.
“Incorporating sustainability in investment management has become part of our industry’s mission to serve society by improving long-term outcomes,” said Margaret Franklin, CFA, president and CEO of CFA Institute.
“This moment represents a valuable opportunity for organisations to address this challenge and help shape a future worth investing in. As the focus on sustainability in investing gathers momentum, it will eventually dictate the sustainability of investing itself.”
However, while investors are flocking to social media and the more non-traditional sources of information to learn more about sustainable investing, an overwhelming 78 per cent of the surveyed respondents believe there is a need to improve standards around ESG products to mitigate “greenwashing” and boost transparency about “green” claims.
Looking at the reasons for incorporating ESG in investment decision, Ms Franklin explained that they vary.
For asset managers, client and investor demand is one of the biggest factors (for 59 per cent of firms), as well as the need to manage investment risks (for 64 per cent of firms). Just 35 per cent consider ESG to improve financial returns, despite the outperformance of ESG indexes during the COVID crisis.
“For many years, sustainable investing could be characterised as ‘a slow-moving but unstoppable train’, but this year’s events have accelerated it.
“With the COVID-19 pandemic, the health and safety of various communities has become a larger consideration. In addition, unrest over racial inequality in the US increased focus on social responsibility,” said Lisa Carroll, CEO of CFA Societies Australia.
In addition to these findings, the report found that 90 per cent of investment professionals expect that their firm’s commitment to ESG research will increase, up from 72 per cent just two years ago, which has led to a shortage of investment professions with ESG expertise.
About the author

About the author


Investment insights
Investors warned of scammers offering green bond investment opportunities
An ESG analyst has called on financial advisers and investors to be careful when dealing with green bond investment opportunities, following a warning by ASIC. ...Read more

Investment insights
One in two Australian retail investors trust financial services industry
The results of a global survey have been released. ...Read more

Investment insights
Stagflation weighing heavily on investor minds
Investors are increasingly worried about a stagflation economic environment. ...Read more

Investment insights
Portfolio manager relieved to dispose of 'problematic' Twitter
According to a portfolio manager, the social media platform has been falling short of potential for years while “underserved” riches have been handed to staff via stock-based compensation. ...Read more

Investment insights
Companies with ‘quality’ attributes key when rates rise
With the Fed indicating a period of rising rates, investors are fearing muted equity market performance. ...Read more

Investment insights
Zenith implores investors to retain long-term investment strategies
Zenith has implored investors to retain their long-term investment strategies. ...Read more

Investment insights
ETFs contract as sharemarkets fall
The ETF industry dropped in value in January, but flows remained positive. ...Read more

Investment insights
How Aussies can invest like Warren Buffett
Arguably the most successful investor of the modern age, Warren Buffett is still the chairman and CEO of Berkshire Hathaway at 90 years old, and currently has a net worth of over $100 billion, writes ...Read more

Wrapping up an eventful 2021
Listen now

What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now

Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now

Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now

Investment insights
Investors warned of scammers offering green bond investment opportunities
An ESG analyst has called on financial advisers and investors to be careful when dealing with green bond investment opportunities, following a warning by ASIC. ...Read more

Investment insights
One in two Australian retail investors trust financial services industry
The results of a global survey have been released. ...Read more

Investment insights
Stagflation weighing heavily on investor minds
Investors are increasingly worried about a stagflation economic environment. ...Read more

Investment insights
Portfolio manager relieved to dispose of 'problematic' Twitter
According to a portfolio manager, the social media platform has been falling short of potential for years while “underserved” riches have been handed to staff via stock-based compensation. ...Read more

Investment insights
Companies with ‘quality’ attributes key when rates rise
With the Fed indicating a period of rising rates, investors are fearing muted equity market performance. ...Read more

Investment insights
Zenith implores investors to retain long-term investment strategies
Zenith has implored investors to retain their long-term investment strategies. ...Read more

Investment insights
ETFs contract as sharemarkets fall
The ETF industry dropped in value in January, but flows remained positive. ...Read more

Investment insights
How Aussies can invest like Warren Buffett
Arguably the most successful investor of the modern age, Warren Buffett is still the chairman and CEO of Berkshire Hathaway at 90 years old, and currently has a net worth of over $100 billion, writes ...Read more