ACCA Strategic Professional · Advanced Financial Management · Corporate environmental, social, governance (ESG) and ethical issues
Which statement best describes 'greenwashing' in the context of sustainable finance?
Greenwashing means making misleading or unsubstantiated claims about the environmental benefits of a product, project or financing instrument. It creates reputational, legal and valuation risk, and is countered by clear use-of-proceeds rules, recognised standards and independent assurance.
- AMaking misleading or unsubstantiated claims about the environmental benefits of products, projects or financingCorrect
- BInvesting exclusively in companies with the lowest carbon emissions in each sector
- COffsetting all emissions through purchased carbon credits
- DReporting environmental data using a recognised assurance standard
Explanation
Greenwashing is giving a false or exaggerated impression of environmental responsibility, for example labelling a bond green without credible use-of-proceeds controls. Best-in-class investing, offsetting and assured reporting are legitimate practices, not greenwashing.
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