Net zero approaches ‘highly vulnerable to greenwashing’

As RI’s net-zero stock take survey enters its final week, sceptics share their thoughts anonymously.

“I cannot in good conscience make a promise in our name that only others – namely companies in the real economy – can and must keep,” said one sustainable finance professional in an email responding to Responsible Investor’s net-zero stock take survey, which closes next Friday (15 January).  

The sustainability veteran, who works for a Europe-based financial group, told RI that they had “resisted all temptations and requests to make a net zero commitment”, despite being called to do so “time and again” by both internal and external stakeholders.  

“Personally, I consider such net-zero approaches to be highly vulnerable to greenwashing,” they said. 

The potential for “green window-dressing” – that is, the tidying up of a portfolio ahead of a reporting date – was one potential risk highlighted. The writer questioned how the churn of holdings throughout a year in net-zero portfolio should be addressed. 

RI also recently spoke to a European asset owner which has opted not to make a formal net-zero commitment for now, after researching the matter with the support of a third party.  

“In a sense, everyone’s going to get to net zero or no one is,” they told RI. “We can’t guarantee we’re going to get to net zero if we’re not seeing the right policies coming through from governments and policymakers.”   

Echoing this, another sustainability professional told RI that without the necessary incentives in place CEOs will likely pursue short-term profits (and their bonuses) with the support of most shareholders. 

“A camel is more likely to go through the eye of a needle than a CEO being given five or 10 years by his shareholders to completely transform the core of the company, the value chain, especially in critical industries – especially if this also requires additional capital,” they said.  

No practical use?

When asked if the lack of net-zero pledge makes any practical difference, the asset owner representative said that they did not think so. “I think we’re doing the same things that many schemes who do have a commitment are doing.” 

They also raised concerns that the shorter-term net-zero portfolio decarbonisation targets may result in “pinch points”. “In December 2024, are there going to be funds dumping high intensity stocks because they suddenly realise that their 2025 decarbonisation target is likely to be missed?”. 

Moreover, they suggested that asset owners unwilling to sell assets to meet targets will find it harder “reputationally” to readjust them the way that some of the European oil majors have done recently. “That reality could raise questions around the credibility of the whole target setting basis,” RI was told.  

Questions were also raised about the potential legal implications of net-zero pledges. “I don’t know if others have started thinking about whether there are implications [of net-zero pledges] that mean they’d have to be a forced seller to effectively hold up their credibility,” the asset owner representative said. 

Hinting at potential bandwagon jumping, they also expressed a degree of “puzzlement” that some of the earlier net-zero commitments were made “when no one knew anything about how we were going to achieve it, or even before the frameworks themselves had been developed”. 

If you would like to share your thoughts on net-zero commitments, please complete RI’s net-zero stock take survey.