Researcher from the School of Accounting and Finance cautions that clear regulatory oversight is needed to protect investors.
By Rachel Doherty
The topic of sustainability is becoming increasingly popular in the investment world with sustainable investing creating a large global impact. This significant shift lead the School of Accounting and Finance's (SAF) Dr. Adam Vitalis and his colleagues to research how green labels attract investors to certain projects which can in turn open the door to greenwashing.
Vitalis is an associate professor at SAF who specializes in assurance, along with his vital contributions to both the Hub for Sustainability Integration and the Sustainability and Financial Management Program (SFM). This study is typical of the work being done at both the Hub and within SFM which blend the the disciplines of finance and environment to highlight sustainable practices.
The study itself breaks down green labels which Vitalis states "indicate to investors that the funds are allocated to environmentally sustainable projects, such as renewable energy, clean transportation, or climate adaptation.” While these labels can clearly have a hugely positive effect on climate issues, allowing green projects to receive more funding, the study does highlight potential pitfalls in the form of greenwashing. This practice involves overstating an asset’s environmental benefits to mislead investors which Vitalis warns can "undermine investor confidence and risks diverting capital away from genuinely sustainable projects."
