In 2022, sustainable investing assets in the US decreased significantly to $8.41 trillion from the peak of $17.1 trillion in 2021, primarily due to revised definitions of sustainable investments and asset managers reporting fewer sustainable assets to avoid accusations of greenwashing. Greenwashing, making unsupported sustainability claims, has become a concern amid regulatory changes. The EU's Sustainable Finance Disclosure Regulation (SFDR) and potential SEC proposals demand substantiated sustainable investment claims. Investors can combat greenwashing through proactive Environmental, Social, and Governance (ESG) stewardship, engaging with companies directly, and driving positive change. Approaches include reactive stewardship addressing breaches, proactive stewardship mitigating ESG risks, thematic stewardship focusing on broad themes, and stewardship through voting policy aligned with annual meetings. Proxy voting, coupled with engagement, strengthens dialogues and underscores investor influence. Integrating stewardship into investment processes, from pre-investment due diligence to post-investment strategies, enhances transparency, ensures genuine sustainability efforts, and fosters responsible practices in the investment landscape. Morningstar Sustainalytics' ESG-related vote recommendations demonstrate the rising importance of ESG stewardship in the investment sphere. Collaborative partnerships with service providers enhance engagement, amplifying investors' impact and promoting sustainable practices globally.
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