Greenwashing checklist
Understanding and avoiding greenwashing and impact-washing in your investments.
How to make sure your investments live up to threir promises.
If you are a visiting this site, you want your money to help tackle big challenges – from climate change to biodiversity loss to social inequality. But in a market full of ‘green’ and ‘impact’ claims, it’s not always easy to tell what’s genuine.
The good news? Sustainable investment options have grown dramatically – just look at our Fund database. And beyond simply investing in green activities, many funds aim to generate positive impact – you can see some of these in our Impact database.
The not-so-good news? Not all sustainable investment options live up to their promises.
This is where greenwashing and impact washing come in - when financial products make sustainability or impact claims that sound great but do not stand up to scrutiny.
Research from the Sustainable Finance Observatory shows that many retail investors believe their money supports a greener economy, when in reality their money may still flow into the same high-carbon or low-impact companies as before with little real-world effect.
Just like buying a car you need to look under the bonnet to check that everything is in order before you invest.
Many financial products are marketed as sustainable — but SFO research shows only a fraction truly align with environmental or social outcomes.
This Greenwashing Hub is your guide to what to look out for when you lift the bonnet on a financial product. It will help you spot misleading sustainability claims so you can make investment choices that truly align with your sustainability goals.
Greenwashing happens when a financial product overstates or exaggerates its environmental credentials – for examplepromoting a green image or using sustainability buzz words while still investing in polluting industries.
Example: A fund claims to be carbon neutral but continues to hold fossil fuel companies in its portfolio.
Impact washing goes a step further. This happens when a financial product claims to have a measurable positive impact – on the environment or society – but provides little or no evidence of real-world change.
Example: A fund claims to create impact but shows not data on measurable real-world change.
Both greenwashing and impact washing can make financial products look better than they are – and divert your money away from genuine sustainability solutions.
Common red flags
It’s easy for sustainability marketing to sound convincing. Here’s what to watch out for when evaluating claims.
Greenwashing red flags
Vague language. Using buzz words like ‘green’, ‘eco-friendly’, ‘sustainable’ or ‘responsible’ that are not backed up by data or clear definitions.
Selective disclosure. Highlighting positive information while ignoring negative impacts (for example emphasising renewable energy investments while also holding major fossil fuel companies).
Over-reliance on ESG ratings. ESG scores can be useful, but they are difficult to interpret. Two financial products might have similar ESG scores but quite different environmental credentials.
Pretty branding, little substance. Using marketing imagery of wind turbines and forests but no transparency on what the fund invests in.
Impact washing red flags
Counting intent as impact. Making claims like ‘investing for positive impact’ or ‘driving social change’ without providing any evidence of how this is achieved.
Confusing outputs with outcomes. Reporting on money invested or projects funded, rather than on actual results achieved (e.g. tonnes of GHG emissions avoided, number of lives improved etc.).
Taking too much credit. Taking credit for impacts that would have happened anyway/even without the investment or taking credit for outcomes achieved by others or unrelated to the investor’s role.
Ask yourself if there is clear information which supports the claims being made. Transparency and data are your best defence against greenwashing and impact washing.
You don’t need to be a financial professional to protect yourself from greenwashing. With a few practical steps, you can look past the marketing and see what’s really inside a fund or financial product.
Read beyond the name. Don’t stop at the product name or summary information about the product. Financial products with nice names often still invest in companies with weak environmental practices. Check other information like the investment policy and investment holdings to see where your money really goes.
Look for transparency. Good sustainable financial products clearly explain their approach. Are the sustainability criteria clear? Is there explanation of how they measure environmental or social outcomes?
Seek credible evidence. Check whether sustainability claims have been verified by independent third parties or benchmarked against recognised standards.
Compare and question. Use comparison tools like our Fund database to see how sustainable a fund really is. There you can find various information about the actual sustainability of the fund and check their claims. How are the companies in the fund contributing to the Sustainable Development Goals (SDGs)? Are the companies in the fund managing their financial risks and opportunities related ESG? Are certain activities, such as weapon or fossil fuels products, really excluded in the funds? You will find much more! Never forget, our AI chatbot is also always on your side to respond to any questions you might have.
If you are an impact-oriented retail investor, you need to go a step further to protect yourself from impact washing. Here’s how to tell the difference between financial products that have a measurable positive environmental impact from those that only claim to.
Real impact-generating financial products aim to:
Deliver measurable real-world outcomes.The product information will provide clear evidence of reduced carbon emissions, improved biodiversity or social improvements — not just financial exposure to these activities.
Demonstrate investor contribution. The investment leads to real world outcomes that would not have happened without the investment being made.
Show transparent methods. The product information will explain how the investment strategy is seeking to have a real-world impact and if/how impact is measured.
Remember that real impact means measurable and additional change — not simply investing in companies that already do good things.
On the other hand, some common examples of impact washing are:
Referencing the environmental benefits of activities by companies in the portfolio and implying that investing in the financial product leads to those environmental benefits. For example; suggesting there is a causal link between purchasing shares of a company in the portfolio and the environmental benefits generated by that company.
Implying that changes in portfolio boundaries (i.e. changing companies in the portfolio) leads to real world environmental impact. For example, presenting changes in the exposure of a portfolio to environmental aspects (e.g. carbon footprint) as if they correspond to an equivalent outcome in the real world. This is incorrect as selling shares in high-carbon companies to reduce the carbon footprint of a portfolio does not do anything in the real world because those companies carry on what they are doing anyway – it is just that their shares are held by a different investor.
Referencing that companies in the portfolio have better environmental performance than their peers and implying that investing in the product therefore reduces environmental impact. For example, suggesting that selecting companies for the portfolio based on an ESG best-in-class approach can be specifically related to an actual environmental outcome.
Look for impact reports that include data and independent verification. The more transparent and data-driven the product, the less likely it is to be engaging in impact washing - and the more confidence you can have that your money is creating real change.
Look for short-term goals. Prefer financial products that set short-term, measurable impact goals rather than long-term and vague ambitions.
Empower yourself with tools and resources. The right tools and trusted information can help make informed decisions. MyFairMoney’s Impact database contains impact savings accounts and other impactful products. If you are looking for fund managers with credible climate stewardship, you can find the top-performing asset managers (from the 30 largest in the world) in our fund database. In addition, sustainability-related engagement and voting are included in the award criteria of some fund labels.
Those tools can help you compare sustainability and impact claims across different financial products.
If we missed a financial product with high impact potential in your country, please reach out to us: [email protected]
Sustainable investing is about aligning your money with your values or seeking to have a positive impact through your investments – but it is also about staying curious and critical.
Greenwashing and impact washing can blur the line between good intentions and real results. By learning to spot misleading claims, checking for transparency and using reliable tools, you can ensure your money is part of the solution.
Remember: every investment choice sends a signal. Make yours count.
The Sustainable Finance Observatory (formerly the 2° Investing Initiative) conducts leading research on greenwashing, impact washing, and sustainable finance. Their findings help investors understand where progress is real – and where investors should stay cautious.