The ESG Phenomenon: IQ-EQ Study

Editorial Staff

21 March 2023

, a Luxembourg-based investor services group, has published a study which found that “greenwashing” concerns are actually stifling ESG investments, as nearly two thirds of respondents said that the fear of greenwashing is the number one reason holding back investors from sustainability in their marketing strategy or marketing their sustainable credentials.

“Greenwashing” is a term used to describe a misleading set of claims made by an organisation about the positive impact a firm, product or service has on the environment, and it has been getting increasing attention lately.

“The lack of clear, universal ESG criteria continues to be a pain point for investors as different authorities state different standards,” the firm continued. “With its two-year anniversary only just behind us, the EU’s Sustainable Finance Disclosure Regulation (SFDR) has yet to serve its full purpose, with gaps in understanding and compliance that ESMA is still struggling to fill,” it said. “The regulator’s rules for the labelling of Article 8 or 9 funds to prevent greenwashing have generated a significant reaction from industry participants, who warn that overly strict guidelines could undermine the intent of the regulation. The new poll data from IQ-EQ certainly supports this thinking.”

The results suggest that the legislation hasn’t been as effective in providing clarity in the sector; consequently investors might avoid ESG investments out of fears of miscommunication.

IQ-EQ's ESG director, Lyons O'Keeffe, said: “The poll result is concerning, but not surprising. The lack of clarity from global regulators is prompting investors to avoid ESG labelling because of potential repercussions linked to greenwashing. Our constant interactions with clients demonstrate that it’s not for the want of trying, as investors are very interested in the sector, however, they fear miscommunication will damage their reputation, or worse. This suggests that clients require additional support to engage in the right way; it’s key that the investment industry does not shy away at this critical time.”

IQ-EQ operates across 24 jurisdictions, providing a range of administration, compliance, asset and advisory services to fund managers, multinational companies, private clients and family offices operating with more than $750 billion in assets under administration.