Greenwashing Dips Among ESG Asset Managers: RepRisk

Finally, there's some good news on the ESG investing front.

Or is it?

According to a new report from RepRisk, for the first time in six years, regulators are seeing a decline in incidents where asset managers misleadingly claim to practice environmental, social or governance investing.

Popularly known as greenwashing, the RepRisk research reports a “12% year-on-year decrease of companies linked to greenwashing, signaling a major shift in corporate behavior.”

However, the findings show, “the severity of incidents is on the rise.”

Also, almost 30% of companies linked to greenwashing in 2023 were repeat offenders in 2024. So, the trend is positive, but companies still have room for improvement. 

According to a statement from Zurich, Switzerland-based Philipp Aeby, RepRisk chief executive officer, a big part of the decline in greenwashing is attributable to the increased awareness of greenwashing risk by stakeholders.

“While regulators have successfully pushed forward legislation to deter greenwashing, the risk will keep evolving as new forms emerge, leaving companies open to reputational damage which impacts their bottom line,” he said. “Greenwashing is often driven by corporate narratives and to uncover it, investors and companies should rely on what external sources reveal about these claims.”

Institutional Investors Embracing ESG?

The RepRisk findings follow a Morningstar report two weeks ago showing an increased appetite for ESG strategies among institutional investors.

The Morningstar report, based on feedback from 500 institutional investors that collectively manage more than $18 trillion, showed that 67% of asset owners surveyed believe ESG has become more or much more material over the past five years.

Couple that with the trend toward mopping up the greenwashing, and it would appear ESG is winning more converts, at least among one group.

Meanwhile, the trend among retail investors and financial advisors, in general, is to move away from ESG investing, primarily for reasons tied to higher fees and weaker performance.

With that in mind, one can’t help but wonder if the decline in greenwashing is the result of better regulatory oversight or if asset managers are just not seeing the upside of pretending to be green.