‘Greenwashing’ alert from IMF calls for better Responsible Investment classification
Michael Ohlsson
The role the funds management industry has to play in the transition to a sustainable global economy is significant and was highlighted this week by the International Monetary Fund (IMF)[1], notes leading independent investment consulting firm, Evergreen Consultants.
Michael Ohlsson, Director at Evergreen Consultants adds: “It is significant that the IMF drew attention to the need to ensure proper regulatory oversight of the funds management industry to prevent greenwashing.
“The report noted the pressure to be ‘greener’ introduces the temptation for funds to promote themselves as being more sustainable than they are,” he notes.
Ohlsson, who is also a director of the recently launched Evergreen Responsible Investment Grading Index (ERIG Index), says fund managers have two clear obligations when it comes to responsible investing.
“First, fund managers must be honest and open about their sustainability intentions.
“Second, they must follow through on those intentions in their investment processes.”
“Those funds with a genuine Responsible Investment tilt are better positioned to make a difference because of the already active position they take on making a change, that is, avoiding harm and targeting sustainability,” says Ohlsson.
The IMF report stated that for the sustainable fund sector to become an effective driver of the transition, policymakers should employ better classification systems for funds, where fund labels and classifications are uniformly used and understood. This helps to summarise a fund’s investment strategy and its overall approach to engagement and stewardship.
“At ERIG Index, we see two main hurdles to reaching this overarching goal as an industry: understanding what Responsible Investment is and promoting transparency for the Responsible Investment approaches by funds managers.
“We see an important role for investment consultants in ensuring that transparency occurs. We believe Responsible Investment is a journey and that a fund manager needs to be very clear about their intentions. It’s ok to be ‘ESG aware’ without being an ‘impact’ fund manager.
“Both are targeting sustainability but in different ways and it is all part of the transition to achieving sustainability targets. As policy and investor awareness evolves, so will investment funds’ sustainability efforts.
“At Evergreen we will continue with our efforts to promote awareness around Responsible Investing for both financial advisers and fund managers,” says Ohlsson.
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