Investing in green doesn’t equal greening the world
10 February 2020
In his article in Investment & Pensions Europe, Ben Caldecott argues that investing in green products and services doesn’t mean you’ve made the world greener. Instead, the activity the financial product or service is encouraging should be green and/or the activity it is discouraging should be brown. Additionally, the activity must also make a clear and measurable difference in one or more of the following ways:
reduce or increase the cost of capital for green or brown
reduce or increase liquidity for green or brown
provide or enable risk management of environmental-related physical and transition risks
encourage or enable company adoption of sustainable practices
support systemic change through spill-over effects
To tackle greenwashing and be certain of making a difference if a product is claiming it will make a difference, it should be clear how it will do it and there should be an accountable and transparent way of measuring the claimed contribution over time.