Investors say firms face ‘no risk of greenwashing accusations if actions are transparent’

European asset managers also starting to see climate targets without plans as ‘red flags’, finds survey

Institutional investors have expressed concerns over portfolio companies ‘greenhushing’, saying it could slow down progress on sustainability.

Some of Europe’s biggest asset managers identified greenhushing – the practice of keeping quiet about environmental efforts – as a key trend in 2024.

Companies have started downplaying their sustainability activities in recent years, worried about the risk that public claims will be met with accusations of greenwashing or under-ambition, or of being ideologically motivated.

Politicians, particularly Republicans in the US, have been taking aim at firms that champion sustainability, accusing them of pursuing a ‘woke’ agenda. Meanwhile, civil society groups and regulators in progressive jurisdictions have moved to clamp down on green claims that might fall short of expectations.

“Investors noted fears of greenwashing from both corporates and asset managers,” said London-based consultancy Sillion, which interviewed 15 large investment houses about their current expectations from listed companies when it comes to environmental and social reporting and strategy.

Participants included large, mainstream European investors like Amundi, SEB, NatWest and Aegon, as well as those dedicated to sustainable investing.

“Many stressed that there is no risk of greenwashing accusations provided actions are transparently communicated,” Sillion noted.

Interviewees observed a new trend for “over-delivering and under-communicating”.

One identified greenhushing as “this year’s biggest trend”, describing it as “reassuring in some senses, but definitely slowing progress in some sectors”.

The survey also found that investors are starting to view corporate climate commitments that aren’t accompanied by underlying plans as ‘red flags’.

Those interviewed expressed “a desire to see greater focus on clear plans for action,” said Sillion.

“Ambitious commitments with no plans to back them up are seen as red flags. Acknowledging that most companies have completed the basics, investors now want to see the tougher activities planned, disclosed, and eventually executed.”

This includes a greater focus on the disclosure of companies’ Scope 3 emissions, which interviewees noted was currently of poor quality.

“Investors are expecting substantial progress from companies in the measurement of their emissions, particularly in enhancing the accuracy of their material Scope 3 emissions,” the report observed. “While there is still no global alignment on calculation methods and tools, businesses are encouraged to be transparent on their methodologies, that are being scrutinised by investors.”

It added that investors are now “emphasising the need for tangible actions towards decarbonisation”, including engagement with suppliers and the development of granular climate transition plans.