Measures urged to mitigate ESG 'greenwashing' risks

Striking a balance

Melanie Kwok, head of sustainability at Sino Group, said there are various ways that companies can strengthen their communications on sustainability, such as reporting on ESG and climate risks, setting sustainability goals, and adhering to the latest local and international ESG requirements.

"As a responsible corporation, Sino Group embraces sustainability through our daily operation. It is important to enhance the transparency of ESG data and disclosure, as well as to work closely with our like-minded partners to communicate ESG (information) in a reliable manner."

Alexander Chan, head of ESG client strategy Asia Pacific at Invesco, said: "As ESG investments grow, the industry is balancing the risks of greenwashing and 'greenhushing' — cases where, even if investors are making green investments, they are cautious not to market them as such. Looking ahead, in addition to regulation, understanding an investor's underlying processes will be key to evaluating greenwashing risks."

With the increased regulatory scrutiny, everyone is becoming more cautious because of concerns about greenwashing risks, he said.

He believes the challenge is to strike a balance between principle-based and prescriptive regulations so that one can minimize the risks of greenwashing and also avoid investing too much time and resources into comply with certain regulations.

Jack Lin, president of MioTech, one of Asia's largest ESG data platforms, raised the issue of "mythology confusion", as each organization and region has its own set of evaluation mythologies. Transparency empowered by big data technologies is the solution he proposes to solve this issue.

Professor Louis Cheng, Dr S H Ho professor of banking and finance and director of Research Centre for ESG at the Hang Seng University of Hong Kong, said firms should spend more time learning about what ESG information is relevant and material, and what should be disclosed. "More importantly, they should not be afraid to say what they have achieved."