Greenwashing – the practice of businesses or investment funds making misleading or unsubstantiated claims about environmental performance – threatens to derail the green finance agenda and the transition to net zero. We’re investigating the role of data assurance in tackling greenwashing and supporting a more transparent and accountable green finance sector.

The net zero challenge

We are living through a climate emergency. According to reports from the United Nations Intergovernmental Panel on Climate Change, we have less than a decade to dramatically change course if we are to avert the worst impacts of global heating.

In response to this, countries across the world have committed to legally-binding carbon emission reduction targets, and in 2019 the UK became the first major economy to commit in law to net zero greenhouse gas emissions by 2050.

Delivering on these targets will require organisations in every sector to transform their activities, requiring significant shifts in investment away from polluting activities and towards projects which support the transition to a zero-carbon economy.

The threat of greenwashing

Investors and consumers increasingly expect their money to minimise environmental harms and support the transition to net zero, with the Financial Conduct Authority (FCA)’s 2020 Financial Lives survey finding that 71% of UK retail investors want to ‘invest in a way that is protecting the environment’.

To meet this need, an ecosystem of firms has sprung up offering services related to the reporting of environmental performance: from providers of data about environmental performance; to ratings of environmental, social and governance (ESG) performance; to funds and investment products advertising positive environmental impacts.

While the green finance sector continues to grow, its integrity is threatened by ‘greenwashing’: the practice of businesses or investment funds making misleading or unsubstantiated claims about their environmental performance.

By diminishing consumer, investor, and policymaker trust in the reporting of environmental performance, greenwashing threatens to discredit the green finance agenda entirely, hindering the transition to net zero.

Our approach

At the ODI, we believe that data assurance – the process, or set of processes, that increase confidence that data will meet a specific need, and that organisations collecting, accessing, using and sharing data are doing so in trustworthy ways – can help to tackle greenwashing.

Data assurance practices range from formal mechanisms, such as audit and certification, to softer mechanisms, such as guidance and the development of best practices. We think that their wider adoption in the green finance sector could improve the transparency, accountability and consistency of environmental performance reporting across the data value chain – helping to address some of the structural causes of greenwashing and providing investors and consumers with confidence.

We’re carrying out this project to explore what data assurance of environmental performance data could look like. We’re currently convening experts from across industry and civil society to discuss these issues, and plan to publish a short policy paper later this year looking at areas requiring further investigation and intervention if data assurance is to be embedded in green finance.

Get involved

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