In my bubble, it feels like sustainable investments are everywhere. The "green" industry is booming and business editors are recognizing the zeitgeist. But anyone who follows news about sustainable investments will notice that focus is increasingly shifting from investments themselves to the question of whether it's all pure greenwashing. In other words, is it all real or just a skillful pretense of sunstainability to gain new customers?
Here is a story to consider:
«Rosa X recently moved her investment account to a hip new online wealth platform because she wanted to invest her money in companies that were as environmentally friendly as possible. However, when she saw what was in her sustainable portfolio option, which allegedly favored companies with high environmental, social, and governance standards (so-called ESG), she was appalled: The largest shares in her new portfolio were not in wind and solar companies, but bank stocks. Worse still, among them were shares in oil companies!
She had imagined something else under sustainable investments. She wanted to invest in solutions for climate change, not in a green-painted version of the status quo, in which well-known companies simply add clever sustainability policies to their well-known business models. She had obviously become a victim of greenwashing. She decided to close her investment account."
How consumers lie to themselves
Greenwashing criticism is usually directed at banks because they mislead their customers with ambiguous terms, diffuse labels, etc. And it's true: In a boom area like sustainable investing, many providers are trying to jump on the bandwagon and sell their investors a good conscience. They do this even when the portfolio content doesn't really make the world a better place. At least not in the way that sustainability-conscious customers would like.
Regulatory authorities have recognized this and are trying to put a stop to the nonsense to prevent the whole industry from falling out of favor because of a few black sheep. It's the right and important thing to do. But let's look at us, investors, instead of the providers. And let's ask ourselves honestly: is it really just the banks that are “lying” to us? Or do we also lie to ourselves a little bit?
The eco-Disneyland in the portfolio
Let's think about who and what makes our life possible. We sit in a solid concrete building and are shocked when we have a cement manufacturer in our portfolio. We heat our apartment with oil to a cozy 23 degrees and scream at fossil stocks. With our ideal "green" financial investments, we are imagining a world with silently turning windmills, and solar systems invisibly embedded in the landscape, surrounded by meadows with methane-free farting cows that don't have to serve for milk or meat.
It is precisely this world – evil tongues speak of an eco-Disneyland – that we would like to see reflected in our stock portfolio. The idea that we could get our hands dirty by owning shares in the companies that effectively enable much of our lifestyle? A nightmare!
Are we all Nimbys?
In the 1980s, the term "Nimby" was coined in the USA. Nimby stands for "not in my backyard". Nimbys are people who like to use the amenities of a modern lifestyle but don't want to put up with any disadvantages in their own environment. They prefer to pass on the disadvantages to other people or areas. In other words: We want electricity everywhere and always, and even more and more of it, but we don't accept buzzing wind turbines or even radioactive waste in our vicinity. We want to fly, but we dont' want aircraft noise above our roofs.
Do you see what I'm getting at? When it comes to our investments, we are all a bit Nimbys, or rather "Nimpfs": not in my portfolio. We want a stable infrastructure and a seamless supply of products and services, but we don't want any of that in our portfolio.
And the solution? There is no easy one. I'm not saying that we shouldn't invest in green plants anymore and that we shouldn't look to see whether sustainability is really what's written on the label.
But instead of just accusing bad banks of greenwashing, we should take a look at our own noses and ask ourselves: What would a portfolio that reflects my freely chosen lifestyle look like? We would be surprised.