“As long as there is no greenwashing in play and the fund's ESG/sustainability claims are not misleading, different tiers of green funds can indeed be suitable for responsible investing and meet different investors' needs.”
However, Gavin Francis, founder and director at Worthstone, says all investments have an impact that could be positive or negative and it is important to look beyond that.
“Whereas with ESG investing you’re aiming to limit harm, with impact investing you’re proactively placing capital where it can have a positive impact,” he explains. “You need to look beyond sustainability or how green a fund is and look more holistically.
“What about the social impact? We’d always recommend looking beyond ESG screening, which only offers one lens for assessing an investment.”
No ‘one size fits all’
Although standardisation has not yet been reached, there are still many metrics advisers can employ to determine the true extent of a fund’s green credentials.
An important part of this, according to Gordon of the Impact Investing Institute, is taking a wide view and assessing the social as well as the environmental impact and studying each part of the supply chain to ensure any benefits are not overshadowed by negative impacts found elsewhere.
She explains that one way to do this is to ensure impact objectives – often expressed through a statement of corporate purpose – are tied to clear metrics and key performance indicators, which assess both their social and environmental impacts.
“Rigorous research will always be the best tool to combat greenwashing, with advisers needing to find the right data points and ratings to meet the requirements of their end investors,” she says. "Communication is also vital between all parties.”
SRI Services' Dreblow agrees, saying advisers need to do some homework if they are to avoid greenwashing or "matching clients to inappropriate fund options".
She says: “It may be that they consult tools such as Fund EcoMarket or that they do their own research, but if an intermediary wants to ensure investment options match client aims, they need to roll their sleeves up a little.
“In order to address the deeper issues that sit behind the challenges advisers face in this area, I’d encourage intermediaries to read around the topic; books such as Doughnut Economics by Kate Raworth and David Attenborough’s A Life on Our Planet are great places to start.”
Likewise, Bioy says that to avoid greenwashing due diligence is key, and argues that advisers cannot rely on a label or a name as it is important to understand that sustainable funds vary in their approach.
“The wide range of options out there reflects the demand for different types of products with different level of greenness,” she says. "There is no one-size-fits-all.”
