In this series, we bust the jargon and explain a popular investing term or theme. Here it’s greenhushing.
What is this?
The recent rise in the use of the term ‘greenhushing’ has led to a few lame jokes about telling plants to stop talking back.
But the term relates to the increasingly common practice of staying quiet about your company’s climate and other ethical pledges. This is partly motivated by fears of accusations of ‘greenwashing’ – making false claims of eco-virtue.
Are such fears well-grounded?
Yes. In 2022, the authorities raided the offices of DWS, the asset management arm of Deutsche Bank, following reports that it was exaggerating the share of its funds invested according to ESG (environmental, social and governance) criteria.
Subsequently, DWS was investigated by the German regular Bafin and by the US watchdog the SEC. Last month, it was reported that the firm – which is facing a $25m SEC fine – has been hit by a fresh probe over the issue.
Keeping quiet: The term relates to the increasingly common practice of staying quiet about your company’s climate and other ethical pledges
Other reasons it is in the news?
This month, two major money managers – JP Morgan Asset Management and State Street Global Advisors – have left the Climate Action 100+, the world’s largest climate change pressure group. The groups manage $3.1 trillion and $4.1 trillion worth of funds respectively. Their departure sparked a debate over their motives.
So why did they leave?
Some argue that fund managers only join such associations if there is a marketing benefit. Paying lip service to sustainability commitments has been seen as a way to win business from private and institutional shareholders.
Others cite the backlash in the US against ESG investing which, in some quarters, is regarded not only as dangerously ‘woke’, but also damaging to jobs and the economy. The objections from some states is growing, and there are warnings of painful repercussions for ESG-oriented managers if Donald Trump wins the election.
Is anti-ESG sentiment growing in the UK?
The opposition to ESG is more muted than in the US, but it is significant that Labour has reduced its plans in this area. The party has said that it will spend about £15billion a year, rather £28billion on battery manufacturing, flood defences, hydrogen power, insulating homes, offshore wind projects and more tree planting. Meanwhile, the Government is contemplating tighter controls of the ESG ratings sector.
Does it mean more greenhushing?
Almost certainly. There’s much focus on the pronouncements of the US giant Blackrock, which is the custodian of $9.1 trillion of savings.
Larry Fink, Blackrock’s boss, has been seen as the poster boy of ESG investing. But the group is now less vocal on the issue, probably because it hopes to escape the censure of Republican politicians.
But Blackrock’s commitment to saving the planet appears unchanged and its international division remains a member of Climate Action 100+.
Does it suggest wider shifts in ESG investing?
In the UK, many private investors have pulled cash from ESG funds.
This is likely to lead to rebranding, with funds having narrower goals focusing on stewardship and sustainability.
