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Australians think banks lie about green credentials – how to spot greenwashing

Australians think banks lie about green credentials – how to spot greenwashing

Ever suspected your bank isn’t investing as ethically as their marketing would want you to believe? You’re not alone, with most Australians suspecting their bank of greenwashing.

More than four in five Australians expect that their money in super, banks and other investments is being invested responsibly and ethically, according to a study by the Responsible Investment Association Australasia (RIAA).

However, 72% of the population have revealed they are concerned their financial providers are engaging with greenwashing.

Greenwashing is a type of marketing spin in which a company portrays a false or misleading impression of the sustainability or eco-friendly nature of its products or services.

For example, consider fast-fashion brands like H&M and Zara, which promote a line of “green” or “organic” clothing and advertise with phrases like “eco warrior”. Meanwhile they are also some of the biggest contributors to textile waste and pollution on the planet, and allegedly profit from the exploitation of their garment workers.

The RIAA study, From Values to Riches 2022: Charting consumer demand for responsible investing in Australia, shows that more and more Australians are becoming passionate about aligning their money with their morals. Almost three-quarters (74%) of Australians would consider moving to a new provider if they found out their current fund did not invest in companies consistent with these values.

And our interest in ethical and responsible super investments has continued to grow over the years, with the number of Australians investing ethically up 28% from 2020. This accounts for 17% of the population.

Putting your money where your morals are

More and more Australians are looking to the financial sector to act on climate change, with five out of six Aussies (84%) believing it is “important” their super fund or bank commits to reducing greenhouse emissions, according to the RIAA report. A further 81% of Australian consumers want to see their super funds or banks commit to achieving net zero by 2050.

And it’s not just climate change that we’re passionate about. Two-thirds of Australians (67%) want to avoid investments involved in animal cruelty, testing, and animal products. However, only 32% of providers meet these criteria.

Further, 63% of Australians also do not want their funds invested in areas that violate human rights, but only 39% of providers offer products that meet these criteria.

CEO of RIAA, Simon O’Connor, said: “Australians are demanding more transparency from their providers, with 75% wanting to know which companies their super fund, bank or other investments are invested in.”

“They are attuned to the threat of greenwashing, and it is holding many people back, particularly when it comes to switching to an ‘ethical’ bank,” he said.

As well as our moral responsibility to commit to a more sustainable future, Aussies also believe in the financial benefits of ethical investments. Almost two-thirds (64%) of Australians believe that responsible and ethical super funds and investments perform better in the long term.

Chief Customer Officer at Australian Ethical, Maria Loyez, said: “As this important report shows, Australians are opening their eyes to the power of their money and where it’s invested.”

“This is nothing short of a seismic shift that investment managers cannot afford to ignore. As this report says, Australians can spot greenwash and will only reward those companies that are truly committed to a better future,” said Ms Loyez.

How to spot greenwashing in your financial products

Ultimately, this report is a timely reminder for everyday Aussies to compare their financial products as their provider may be investing in areas that do not align with their morals.

There’s nothing stopping a provider to use the words “ethical” or “sustainable” in their branding. Just because your provider uses the word “green”, doesn’t mean it’s investing in eco-friendly and sustainable areas.

This is why it may be worth taking stock of your financial products, including your super fund, and considering the following:

  • What is the investment strategy? Hop on the providers’ website or give your customer service representative a call to investigate its investment strategy. While they may be funding some renewables to call themselves “green” they may still be investing in coal, for example.
  • Is the information transparent? If a provider is branding itself as ethical and sustainable, but you’re struggling to find any tangible proof or clear evidence of this outside of marketing, it may be greenwashing.
  • Are the outcomes being tracked? It’s worth considering that an ethical and transparent provider should be reporting back to its customers about how it is progressing with its green commitments on an ongoing basis. Look for reports from the provider tracking its sustainability outcomes for some indication it’s not just greenwashing.

How to find ethical financial products

So, how can everyday Aussies better identify the financial products that align with their morals and values? CEO of RIAA, Simon O’Connor believes independent verification could be the key.

“Independent verification of sustainability claims is becoming key to winning trust. Three-quarters of Australians say they would be more likely to invest in responsible investment products that have been independently certified by a third party,” said Mr O’Connor.

Customers may want to consider looking at products that display the RIAA’s Investment Certification. Providers that are in this program are independently classified as meeting its strict requirements around responsible, ethical, and impactful investment products and services in Australia and New Zealand.

Independent verification is already present when it comes to identifying products that do not invest in tobacco, with the ‘Verified Tobacco-Free’ certification stamp to be displayed on said products.

If you’re unsure if your bank or super fund meets your criteria, it may be worth looking at the RIAA's Responsible Returns to see if it is there. And it’s always worth considering comparing your financial products against others in the market to ensure they’re still the best option for your values as well as financial needs.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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