Survey confirms greenwashing is a global problem for investors

Mike Taylor

Managing Editor/Publisher, Financial Newswire

17 November 2022

Greenwashing remains a bugbear of the funds management industry, according to research and ratings house Morningstar after conducting a focused survey of investors.

The Morningstar survey also reveals strong support among Australian asset owners for regulations supporting specific objections around emissions reductions and similar levels of support for ESG factors being material to portfolio investment choices.

Asset owners taking part included insurance, OCIO/multi-manager, family office and sovereign wealth, as well as pension funds. Sixty-four percent of those surveyed oversee more than $1 billion in assets, 36% more than US$10 billion and 12% more than US$100 billion.

High-level findings include:

• ESG Widely Considered Material. The vast majority (85%) of survey respondents including Australian respondents believe ESG factors are material to investment policy. Most (70%) feel ESG factors have become more material in the past five years.
• Overall, over 50% of Australian asset owners believe that Greenwashing was at least a moderate problem, with 26% citing it was a major problem.
• Opinion was however divided about the best way to tackle Greenwashing, with the most popular response being stronger enforcement of current regulations (26%) (compared to the global average 18%), followed by better data (23%) and more transparency (18%).
• ESG Ratings, Data & Tools Improving, But Need to Get Better. APAC AOs still see plenty of room for improvement in ESG tools, with nearly half (49%) saying they would benefit from more accuracy, 46% from more timeliness, and 40% from more objectivity of ESG data. Furthermore, developments in regulation, data, reporting, analytical tools and investment processes appear to be interdependent, with each aspect shaping, and being shaped by, the others.

Commenting on the findings, Morningstar Indexes’ Elle Kuta said that as an ESG ratings, data and service provider, Morningstar embarked on the Voice of the Asset Owner survey to gain better insight into the needs of our asset owner clients.

“Despite their differences and the fact that each is on a different stage in their own ESG journey, asset owners are quite unified in their ESG commitment,” Kuta said.

“Our findings also revealed that Greenwashing remains a bugbear for the industry, particularly for Australian asset owners and comes at a time when the corporate regulator Australian Securities and Investment Commission signalled1 that it would step up its scrutiny in this area,” she said.

“Although asset owners appear open to stronger enforcement of existing regulation, there does not seem to be much appetite for fresh regulation on this area.”

“The need for better transparency to address Greenwashing was also called out by asset owners. Now more than ever clearer data, reporting, and analytical tools will be critical for asset owners as they continue to embark on their ESG journey while remaining fully committed to ESG investing.”