As more investors look for their money to reflect their values, understanding exactly where it is invested is essential. Whether you want to support companies with strong environmental practices, avoid certain sectors or consider the wider social impact, you need to be able to judge whether sustainability claims are meaningful. Not every fund that describes itself as ethical or sustainable is as clear as it should be, which means ethical investors need to be aware of the risk of greenwashing.
What is greenwashing?
Greenwashing is when a product, service or business is presented as more environmentally or socially responsible than evidence can support. For investors, that can make it harder to know whether a financial product genuinely matches their values and concerns.
In practice, greenwashing can appear in different ways. A fund may use broad phrases such as “eco-friendly” or “responsible” without clearly explaining what those words mean. It may focus on selected positive examples while leaving out less favourable information or make claims that are not backed up by clear data. Another warning sign is when a fund’s holdings do not appear to match its sustainability message. These issues are not always obvious, so it is worth looking beyond the marketing language.
If you want to conduct your own research, you can access fund factsheets or you can look at your provider’s website to find more information.
- What does the fund actually invest in?
- Does this fund clearly explain the sectors or activities it avoids?
- What evidence is used to measure progress over time?
These checks can help you ask better questions and make more informed decisions alongside seeking professional advice.
In response to the issue of greenwashing, the Financial Conduct Authority (FCA) has introduced the Sustainability Disclosure Requirements (SDR) and an anti-greenwashing rule. Together these regulations ensure that firms making sustainability-related claims must be fair, clear and not misleading. The rules are designed to make information about sustainable investment products clearer and more consistent, so investors can compare options with greater confidence and better understand what sits behind the claims being made. Once a fund has gained an SDR label, they must produce a Consumer Facing Disclosure highlighting the relevant data.
If you can’t find the answers you’re looking for yourself, Origen Ethical Futures can help you take a deeper look at where your money is invested. We can help you understand how your ethical priorities fit with your wider financial plans. We take time to discuss what responsible or ethical investing means to you, assess suitable investment options, and carry out due diligence before making recommendations. Our research process considers whether funds are likely to align with your values and long-term financial goals, and we continue to review our recommendations over time.
If you want to start your ethical finance journey, or review your existing investments, get in touch with your Origen adviser and let us make your money change your world.
CA13654 Exp:08/2027
