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Why greenhushing is ‘counterproductive’ to ethical investing

4 minute read

The deputy CIO of Australian Ethical has expressed his views on greenwashing, greenhushing, and recent developments in the regulatory space.

The recent trend of firms quietly hiding their climate goals to avoid scrutiny has been described as “counterproductive” by Australian Ethical deputy chief investment officer John Woods.

In Australia, the trend of “greenhushing” has been observed among companies, superannuation funds, and investment managers who have opted not to disclose climate ambitions and actions, particularly in the wake of regulatory action on greenwashing.

But Mr Woods told InvestorDaily that greenhushing is not the right approach.

“It feels counterproductive because one of the ways we think we can have impact is by encouraging others to follow along in the way we invest, and other investors that are doing good things with their capital, if they’re not able to share those stories, it’s hard to see how it will encourage others to follow,” he explained.

“Australian Ethical’s capital alone is not enough for the challenge that we face, so we need to bring a lot of others on this journey. So the advent of greenhushing seems quite counterproductive in what we’re all looking to achieve.”

Greenhushing was slammed by Joe Longo, chair of the Australian Securities and Investments Commission (ASIC), at a panel session in June this year.

“I think greenhushing is not a good thing to the extent it exists,” Mr Longo said.

“It’s a failure to engage and by keeping your head down for that reason, you’re not really engaging with consumers, investors, and the economy.”

Mr Longo indicated that firms which opt to withhold information about their climate goals may be engaging in greenwashing.

ASIC has ramped up its action against greenwashing this year, including commencing proceedings against Active Super, Vanguard and Mercer Super. Mr Woods said the regulator’s actions so far have been encouraging.

“One of the things we’re encouraged by is the attention in the area to sort, you know, who’s applying ethical investing in a framework that the investing public understands to be the right way. So we’re encouraged by ASIC’s actions in that area to help lift the standard and more ethical investing,” he said.

Dugald Higgins, head of responsible investment and sustainability at Zenith Investment Partners, last month said that there had been “an observable” increase in greenhushing locally since ASIC kicked off its first civil litigation.

However, he suggested that greenhushing is unlikely to succeed for two key reasons.

“Firstly, the financial world is undergoing one of the biggest changes in reporting standards in over 50 years. Love them or loathe them, most jurisdictions globally are preparing to localise standards mandated by the International Sustainability Standards Board,” Mr Higgins said.

“In Australia, climate-related financial reports are set to be mandated for much of the real and financial economy and Parliament has legislated the ambition to reach net zero by 2050. This mirrors actions from many major global trading partners.

“Clearly, going dark on disclosures is not an option.”

Touching on the government’s plan to introduce mandatory climate-related financial disclosures in Australia, Mr Woods assessed that the topic is “very complex”.

“If I think about sort of discussions with advisers etc, it was already very complex to express risk and return, and expressing risk, return and how you achieve ethical outcomes or potential impact outcomes, but there’s a lot of work to be done,” he said.

“I’m not surprised it’s got so much attention at the moment given we’re not all on the same page on even what ESG means – like probably the most established term in the industry – let alone some of the more emerging terms like impact investing.”

According to the second round of consultation on climate-related financial disclosures published in June, mandatory reporting requirements are expected to commence in July 2024 for Australia’s largest listed and unlisted companies and financial institutions.

Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.