"All natural," "eco-friendly" and "green" — we've seen it all before. Food, home goods and clothing companies have all jumped on the sustainable bandwagon, and it's not just because of their undying devotion to the environment.
According to the 2019 Accenture Chemicals Global Consumer Sustainability Survey, more than half of consumers surveyed would pay more for sustainable (meaning recyclable or reusable) products.
But not every company is genuine in its pursuits of a cleaner planet or more equitable society. And making false or misleading claims about "greenness" can affect investor trust.
Greenwashing is a misrepresentation of a product, service or investment, making something appear to be more sustainable than it actually is.
Environmental, social and governance criteria are at the heart of ESG investing, which has grown significantly in popularity over the last several years. ESG criteria are factors that measure an investment's sustainability. Unfortunately, with the rise of consumer and investor interest in ESG comes the rise in greenwashing.
This can lead some businesses, such as oil companies, to be included in funds that investors may not have expected. Critics have called ESG and other forms of sustainable investing marketing ploys or scams, noting that sustainability is just a trend that companies are trying to capitalize on.
One reason why greenwashing has been able to slip through the cracks when it comes to investment securities is that there are numerous ESG data providers. And because multiple companies offer ESG evaluations, it can be difficult to know which one to trust.
Greenwashed investments, or investments not being what they claim, was the biggest concern for 44% of investors when it came to ESG investing, according to recent research from Quilter, a U.K.-based wealth management service.
The field of sustainable investing is still relatively new, and while industrywide standardization may still be a long time coming, there are ways to increase the green in your portfolio (and hopefully your wallet).
ESG funds usually publish impact reports, allowing investors to see the real-world changes their investment dollars are making. Several robo-advisers offer automated ESG investment portfolios.
If you'd like professional help, you can also work with a financial adviser who has a chartered SRI counselor certification, which is a designation program designed to teach best practices for socially responsible investing.
Alana Benson is one of NerdWallet's investing writers. She is the author of "Data Personified," "WTF: Where's the Fraud?" and several young adult titles.
