The High Price of Greenwashing

Just a few days prior it was announced that aviation giant KLM will face legal action in what is thought to be the first corporate lawsuit about airlines and net-zero claims, as well as one of the first cases about carbon offsets.

And, early last week, BNY Mellon Investment Adviser paid the U.S. Securities and Exchange Commission (SEC) $1.5 million to resolve charges that it misstated ESG investment policies for several mutual funds it managed.

‍Why it matters: Greenwashing is growing increasingly expensive for corporations who seek out the financial and marketing benefits net-zero pledges and ESG commitments can offer without keeping their word.

‍The big picture: Everyone from regulators to consumers are growing more sophisticated when it comes to spotting virtue-signaling. While false net-zero commitments and misleading green investments may come at a higher legal cost, companies leaning into purpose-driven virtue signaling are also taking a hit.

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The Wall Street Journal: Unilever’s share price and sales growth have lagged behind competitors in recent years.

‍Just ask Unilever PLC, whose push to give each of its 400 brands a social or environmental purpose has been ill-received by investors.

‍What they’re saying: “A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot,” said Terry Smith, chief executive of Fundsmith, one of Unilever’s largest shareholders.

‍This is an excerpt from Fifth Wall’s weekly newsletter. Subscribe here for more insights from our team.