Greenwashing and false solutions
Regarding the climate crisis, a persistent theme of concern is that greenwashing of climate-related actions, bluewashing of supposed steps toward a just transition, and false solutions for climate change promoted by businesspeople and politicians offer numerous opportunities for private interests to capture the State.
While greenwashing likely requires no explanation, false solutions are those that do not address the root causes of climate change or, in fact, make it worse. A brief list of false solutions includes carbon pricing schemes, nature-based solutions, bioenergy, natural gas, hydrogen, waste incineration, nuclear power, purely renewable energy, hydroelectricity, geoengineering, and carbon capture and storage (CCS) technologies.
According to Mona Sabella of the Corporate Accountability Working Group (CAWG), “[ESCR-Net] has an Environmental Justice Working Group to observe aspects of corporate capture and false solutions. Corporations come with false solutions, they say they are doing good for the world and, in reality, they are doing the opposite. They make a lot of money with false solutions. To change corporate capture is to change the system in which these massive corporate powers play the climate agenda. In the past, these same corporations harmed the environment and contributed to climate change. And they continue to do so because they are driven by profit and greed.”
Climate finance is an area of concern for both greenwashing insofar as carbon targets and environmental, social, and governance (ESG) performance, for example, as well as false solutions.A recent article by the Financial Times highlights a Greenpeace report about green bonds in Brazil and alludes to corporate capture regarding how these instruments were popularized by the government but financialized and profited upon by private interests.
“Through August [2023], green and sustainable bond funds recorded $24.5bn of inflows globally, beating the $22bn inflow for all of 2022, according to an October report from Bank of America. This demand came amid higher borrowing costs globally and a slowdown in inflows for conventional funds, BofA said. Green and sustainable bond funds now comprise 12 per cent of the wider fund market, up from 10.6 per cent at the end of 2022, the bank said. As investors gobble up green debt, companies and their underwriters are under scrutiny.
The latest investigation into questionable green debt comes from Unearthed, Greenpeace UK’s investigative journalism division, which shone a light on an obscure corner of the green debt market in Brazil. In recent years the Brazilian government has popularised Agribusiness Receivables Certificates (CRA), which are debt securities issued by a securitisation company backed by agribusiness credit rights, according to a definition by the IMF. But there is little public information available about them. Greenpeace’s Unearthed investigation found that funds raised by CRAs were financing controversial companies including deforesters, land grabbers and ranchers accused of slave labour in Brazil. (…)
Sustainability-linked bonds have provisions that increase borrowing costs for companies if they fail to hit specified green targets. While initially touted as the "next big thing" in impact investing, SLBs have not achieved widespread use by impact bond fund managers, Morningstar said earlier this year. SLB issuance has dropped 44 per cent to $12bn this year, according to Morgan Stanley. "We think investors want SLBs to work, but challenges with the structure amidst high greenwashing risk are deterring [companies]," the Wall Street bank said in August.
Increasingly, environmental activists are not the only ones investigating green bonds. Regulators are on the hunt too. In May, the UK’s Financial Conduct Authority launched an investigation of the market for sustainable loans. The FCA started interviewing bankers and borrowers about loans that potentially reward borrowers with lower rates but fail to have a significant environmental impact. (…)
The greenwashing challenges with green bonds fall primarily on banks, which underwrite the debt, but are also big issuers themselves.”
One challenge that comes up repeatedly are business associations or corporate alliances that claim to work towards solving the climate crisis, but instead greenwash to promote business as usual and the bottom line. One recurring name is theGlobal Battery Alliance(GBA) and specifically its greenwashing activities of transition mineral supply chains in the Congo and Nigeria.
In January 2023, the GBA launched the Battery Passport, an initiative to disclose the sustainability metrics and materials provenance of its members’ batteries, which are composed of automotive companies, miners, and electronics manufacturers. Civil society organizations have not been allowed to participate in this initiative and, at the site of mining for these companies’ supply chains, there remain numerous examples of child and forced labor, among other human rights violations. The most worrisome capture element of the GBA is narrative capture; national and international organizations from the U.S. Government to the International Labor Organization (ILO) to the United Nations have lauded the GBA’s efforts, effectively creating cover for them to capture and greenwash the narrative about the transition minerals supply chain.
Another example of corporate-sponsored greenwashing efforts is theTaskforce on Nature-related Financial Disclosures(TNFD). According toMary Beth Gallagherof Domini Impact Investments LLC, “Regarding deforestation, I’m concerned about transparency and traceability insofar as how a company implements its commitment. Companies are good at developing tools for efficiency, but not at protecting human rights and environmental outcomes. There could be corporate capture in the due diligence if the standards assessments are favorable to companies. For example, TNFD is led by companies and investors; there’s no civil society presence. It is the main way to assess biodiversity impacts. There is a lot of investment in the reputation of this entity, even though it is ineffective. It is a big example of greenwashing.”
The main problem is that all of the TNFD’s 40 members are executives from big corporations and financial institutions.According to the Financial Times, “There’s nothing wrong with business executives forming a body to design and lobby for a particular model of reporting standards, or any other sort of regulation. But if that body’s output is generally accepted as the global foundation stone for disclosure rules in this space, then there are obvious and serious questions about representation, accountability and conflict of interest.” In May 2023, 62 CSOs signed a letter to the TNFD’s co-chairs warning that the initiative was “distracting from, and undermining, real and sustainable solutions.” Furthermore, the organizations “argued that the TNFD’s framework cut companies too much slack on their disclosure of nature-related grievances filed against them, and on transparency around the location of their operations and suppliers.” They also warned that such flaws would facilitate “greenwashing” and hamper efforts to hold companies accountable for harm to nature.