S&P Finds Little Evidence ‘Greenwashing’ Is Widespread

Despite growing concerns among investors about the so-called “greenwashing” of sustainable investments, there “seems to be little evidence that it has become widespread in reality,” according to S&P Global.

In a recent comment, the firm said a lack of transparency on instrument labeling, reporting, and data disclosure leaves many investors wondering whether the instruments will have any real social or environmental impact. S&P cited a Quilter Investors survey from May that found that greenwashing was the biggest concern among 44% of investors regarding environmental, social, and governance (ESG) investing. The survey said investors have become increasingly sensitive to the effects of companies that may be exaggerating their “green credentials” to capitalize on the growing demand for the products.

American environmentalist Jay Westerveld first came up with the term greenwashing in a 1986 essay in which he claimed a hotel was asking its guests to reuse towels to help protect the environment when it was really just looking to cut costs. However, S&P said that since then “concerns about greenwashing have become broader in scope with companies perceived to be making exaggerated or misleading environmental claims, sometimes without offering significant environmental benefits in return.”

S&P also said the large volume of ESG marketing and labeling, combined with nonuniform sustainability commitments and reporting, has made it increasingly difficult for investors to know which claims are reliable and which are “greenwashed.” The firm said ESG investing has become so mainstream that it estimates sustainable bond issuance, including green, social, sustainability, and sustainability-linked bonds (SLBs), could collectively exceed $1 trillion in 2021, a near five-fold increase since 2018.

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“A lack of consistency in ESG terminology associated with various ESG investments has become a key concern that may drive investor confusion when it comes to identifying which companies or financial instruments conform to a given set of ESG standards,” said S&P.

The firm cited the Journal of Environmental Investing Report 2020, which found there are more than 20 different labels being used for sustainable debt instruments, which all align with different guidelines or frameworks.

“The wide scope of labels and even wider scope of what constitutes a ‘green’ or ‘social’ project makes navigating the sustainable debt space increasingly complex for investors and reduces comparability across instruments,” said S&P.

Despite the confusion, the firm said increased scrutiny by investors is the best weapon against potential greenwashing as they demand more transparency and credibility.

“It’s becoming clear that entities can no longer simply state their sustainability goals or long-term targets,” S&P said. “Ultimately, we believe that companies that can substantiate their environmental claims, and align financing with a business strategy rooted in long-term ESG goals, will be better fit to withstand potential reputational, financial, and regulatory sustainability-related risks that will evolve over time.”

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Tags: and governance, environmental, Greenwashing, S&P Global, social, sustainability-washing, sustainable bonds

Andrew K. Kelsen

The $13.1 billion Chicago Teachers’ Pension Fund (CTPF) has named its alternative investments portfolio manager, Andrew K. Kelsen, as its interim CIO.

Kelsen steps into the role as former CTPF CIO Angela Miller-May begins her new post at the $54 billion Illinois Municipal Retirement Fund (IMRF). Like Kelsen, when she took the top post at Chicago Teachers’, Miller-May was promoted to CIO from within the organization from her role as director of investments. She served for four years in the CIO role and, among other achievements, is credited with diversifying the fund’s roster of investment partners to include more firms owned by minorities, women, and people with disabilities, which is also an area of focus for IMRF.

Before taking the post at IMRF, Miller-May led the Chicago Teachers’ fund to a historic high—a 28.68% net return on investments for the 2020-21 fiscal year, beating the benchmark of 27.03%. Over the past three years, her returns averaged 12.17%. She will take the post at IMRF following the exit of former CIO Dhvani Shah, who moved into the CIO role at the automotive-themed $16 billion JM Family Enterprises.

Kelsen has been at CTPF since 2014 and has more than 30 years of experience in research, capital market management, portfolio management, asset allocation, consulting, and pension fund investments. He studied economics at Keene State College and is credited with helping to move CTPF’s private equity portfolio from a pure fund-of fund-model to a hybrid construct.

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His primary CTPF responsibilities have been focused on private equity, private credit, natural resources, asset allocation, portfolio strategy, securities lending, transition management, cash management, and portfolio efficiency. The fund says he has been instrumental in providing knowledge transfer and mentorship to the investment department, according to a press release from CTPF.

Despite beating its benchmarks for the past 29 years (i.e., since the fund’s inception), the funded ratio for pension benefits was 45.4% based on the market value of assets as of June 30, 2020, according to a CTPF spokeswoman.

According to CTPF, as interim CIO, Kelsen will be mainly responsible for managing and directing CTPF’s investment operations in accordance with the Illinois Pension Code; the investment policy statement (IPS); the board rules, orders, and resolutions; and all applicable laws, and he will report to executive director Carlton W. Lenoir Sr.

Lenoir said, “We appreciate Andrew’s willingness to step into the role of CIO. With his career experience and background, Andrew will make an immediate impact, providing leadership for the team without interruption to our policies, pacing, objectives, and goals. I look forward to working with him in his new role.”

The spokeswoman for the fund said CTPF has not hired a search firm to permanently fill the CIO position at this time.