UK businesses are being hijacked by ineffective and costly green advisors that could actually damage their reputations, a leading ethics advisory group warns.
More than $650 billion (£478 billion) will be poured into climate-focused funds worldwide in 2021, making 2022 another record-breaking year for green finance.
The issue made headlines this week when Environmental, Social or Governance (ESG) funds with over $1 trillion (£740 billion) in assets were found to be falling short of their stated targets.
Bloomberg reported that forensic analysis of the industry resulted in the removal of ESG tags from more than 1,200 funds (about one-fifth), according to financial services firm Morningstar’s classification system.
Climate and sustainability as companies of all sizes across the country hire advisors for sustainability, ethics and carbon footprint reports to avoid backlash and boycotts from environmentally conscious consumers Dunn warned that the need for rigorous data on Mr. Botterill is the founder and CEO of Rio ESG, a UK-based company that advises companies on their sustainability practices.
However, these advisors are receiving cash from companies for changes that are largely unsustainable, leaving them vulnerable to accusations of greenwashing.
“As environmental concerns grow and verbal and natural warnings become increasingly harsh, the pressure on the global investment industry to address climate change is at an all-time high,” added Botterill.
“Businesses across the UK and around the world are understandably taking steps to address their ethical and environmental commitments. They throw cash at advisory firms to do so, but the return is mostly useless and expensive reports.
“Companies that fail to act or don’t implement knee-jerk measures are vulnerable to accusations of greenwashing, such as the funds highlighted in the Bloomberg report.
“Organizations must acknowledge where they lack the expertise to validate their ESG calculations.
“Not only is it the right thing to do, but it also makes business sense as consumers increasingly avoid companies that refuse to take real steps to be more environmentally friendly and socially responsible.”
Botterill added that the rapid shift in sentiment towards companies that can help enable a greener future is already widening the gap between ‘clean’ and ‘dirty’ organizations.
“We need to stop pricing issues and provide solutions that are realistic, achievable and affordable,” he added.