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sustainability sustainability

Greenwashing and the Sustainability Disclosure Requirements

Rhiannon Jones • 02/05/2023
The FCA is aiming to create an investment environment in which consumers have access to clear, comparable criteria for qualifying sustainable investments, ensuring they are well-informed of what “green” looks like.

At the British Property Federation’s last annual conference, the Bank of England called on the real estate industry to prove it has credible plans to achieve net-zero, citing greenwashing as a “real risk” to investment within the sector1.  

The core of the greenwashing issue is the difficulty in identifying it; being able to requires either (a) having a comprehensive understanding of the issue at hand, and what “green” really looks like in the context of that issue, or (b) terminology and performance measurement trends to exhibit a level of uniformity, which necessitates regulation or industry consensus on preferred terms and precise definitions.  

In recognition of this, the Financial Conduct Authority (FCA) launched a consultation on the introduction of Sustainability Disclosure Requirements - for which a policy statement will be published by the end of June - stating that “consumers must be able to trust [that] sustainable investment products…contribute to positive environmental or social outcomes”. Upon publication of the SDR policy statement, its “General Anti-Greenwashing Rule” (which clarifies existing guidance on this issue) will come into effect immediately, with its other requirements being phased in over the proceeding 12-24 months.  

The General Anti-Greenwashing Rule 

As consumer’s environmental awareness has grown, more terms have emerged to market products as consistent with customers’ environmental values. For example, “Carbon Positive” which confusingly means achieving a net position of negative carbon impact (i.e., removing more carbon from the atmosphere than you emit). The abundance of new terms and the nuances between them makes it difficult to distinguish the “green” from the “greenish brown”, and so the issue of greenwashing has become a complex one; so complex that there are now multiple recognised forms of greenwashing to contend with2.  

The overarching principle of the General Anti-Greenwashing Rule is that “sustainability-related claims must be clear, fair, and not misleading”2. The methods by which some companies greenwash are, however, more involuted than this definition. Such forms of greenwashing might be distilled into two categories: methods to reduce the level of responsibility taken for an issue, and methods to appear more active in addressing an issue than might be true. The following are some of these methods and tips for how to spot them.   

Methods to Reduce Responsibility for an Issue


“Green shifting” is a method of greenwashing solely focused on reducing responsibility, by shifting it directly on to consumers3. This form of greenwashing is most prevalent amongst organisations that sell goods, for example, by encouraging consumers to utilise a re-sale platform for fast fashion items to distract from their own responsibility to address the root of the issue.  

From a CRE perspective, the closest comparison we might draw is to occupiers consuming energy within properties they lease. Whilst a landlord’s control over this matter may be limited depending on the structure of the leasing and energy procurement arrangements, industry guidance designed to support real estate owners to develop credible net-zero pathways typically requires that occupier energy consumption be captured within scope 3 targets (see for example, the BBP’s Net Zero Carbon Pathway Framework). This category of emissions will usually constitute most of a real estate owner’s emissions - comparable to Cushman & Wakefield’s main source of emissions being the client facilities we manage - and so it is important to acknowledge, seek to quantify, and make genuine efforts to engage with the relevant parties to minimise this area of impact. This is a challenge which will not be solved quickly, and it is perfectly acceptable to say so. We need to encourage a level of transparency on such challenges that enables collaborative solutions to be developed.  

The term “Green crowding” describes the notion of hiding in a group and moving at the speed of the slowest adopter3, for example, by joining industry initiatives/ commitments to provide a banner under which to hide insufficiencies in specific targets or actions. There are hundreds of genuinely positive initiatives seeking to support different methods of reducing our collective impact on the environment, but this volume also means it is potentially quite easy to green crowd. Despite the ease of access, it is a sophisticated way of greenwashing as industry alliances ostensibly seem robust and trustworthy, especially if the take-up is high. One indication of a company using this tactic might be the presence of an announcement of their “signature” to an alliance, but an absence of subsequent reporting of environmental performance which references the commitment they have made through that alliance. For example, a company may publicise that they have joined the Alliance to End Plastic Waste, but are they reporting reductions in plastic waste, or communicating meaningful measures they are researching to achieve this in the longer term?  

“Green hushing” relates to the deliberate under-reporting or hiding of sustainability-related issues to evade scrutiny3. Many companies will only take their sustainability-related reporting as far as is required by regulations such as the Streamlined Energy and Carbon Reporting requirements and the TCFD disclosure requirements, which became mandatory for certain company types in the UK this year. Beyond these requirements, particularly if these disclosures do not shed a flattering light on the company’s management of sustainability-related issues, they may provide case studies of positive highlights which serve to compensate for any downfalls in the mandatory disclosures. Look for references to established reporting frameworks such as GRI, EPRA’s sBPRs, and INREV, to indicate that a full and complete picture of sustainability performance is being communicated. 

Methods to Appear Active in Addressing an Issue 

“Green rinsing” is the act of regularly changing sustainability targets before they are achieved to disguise insufficient action3 whilst communicating proactivity. Recognising this form of greenwashing requires comparisons to be made between performance updates over time, which in turn demands the time of the consumer of that information (time that users of this strategy may be hoping consumers do not have)! Companies may also however update their targets to increase their level of ambition, for example, if they have sought validation from the SBTi for their emissions reduction targets and brought them in-line with a 1.5-degree trajectory. A key giveaway is whether they have acknowledged that the targets have changed and provided an open explanation, or whether they are trying to slip in a subtle wording change or new caveat to the target under the radar.  

Another recognised form of greenwashing is “Greenlighting”, which relates to featuring a particularly green aspect of an organisation’s operations or products3. This is seen to be common in the automotive industry, where the marketing focus on electric vehicles is potentially over-inflating consumer views of their market share. The same principle may overlay directly on to CRE, where funds may be highlighting “green” assets and under-representing the proportion of “brown” assets. Benchmark assessments such as the Global Real Estate Sustainability Benchmark (GRESB) seek to ensure that that this is not possible for its participants, with evidence required to show that all relevant assets are included in the submission.  

“Green labelling” is the most endemic form of greenwashing and is the key form that the SDR aims to address. Green labelling is calling something green or sustainable, or using visual cues to present something as sustainable, without sufficient qualification3. This has been the subject of recent media attention, with companies from air travel providers to cleaning product manufacturers having their advertising scrutinised, amended, or even banned.  

Green labelling is an interesting form of greenwashing in the context of CRE and may even happen unintentionally. For example, the term “ESG compliant” has emerged in reference to buildings, which in general carries no intention of greenwashing, but simply does not mean any one thing to the market. Whose ESG strategy is the building compliant with?  

Another unintentional building-related example is marketing a property as “BREEAM Excellent” without further context. Whilst the building may have achieved BREEAM Excellent for its construction, it may not meet BREEAM Excellent standards of operation (and vice versa), and so the type/scope of green building certification should be made clear during marketing to ensure an accurate representation of the building’s credentials is provided to prospective purchasers, who may or may not be familiar with the certification system.  

Green labelling and the SDR 

At an investment product level, the FCA is proposing a labelling system which categorises products based on the sustainability objective they are seeking to achieve. Assessing the objective is intended to result in the categorisation of the product under one of three labels:  

  • Sustainable focus: investment in assets that are environmentally and/or socially sustainable  
  • Sustainable Improvers: investment to improve the environmental and/or social sustainability of assets over time 
  • Sustainable Impact: investment in solutions to environmental or social problems, to achieve positive, real-world impact  

The labels are non-hierarchical, mutually exclusive, and will be underpinned by a set of clear, objective criteria. These criteria will cover the specification of an objective, investment policy and strategy, key performance indicators, firm-level attributes (resourcing of ESG), and investor stewardship (as defined by the UK Stewardship Code 2020). The use of a label will be entirely voluntary, but there will be enforced restrictions on the sustainability language that can be used in relation to unlabelled products (the “naming and marketing rules”). 

The intention of this regime comes back to the idea of achieving uniformity in sustainability terminology. The FCA is aiming to create an investment environment in which consumers have access to clear, comparable criteria for qualifying sustainable investments, ensuring they are well-informed of what “green” looks like. This understanding will be supported by a set of disclosure requirements which will serve to limit the effectiveness of Greenshifting, Greencrowding, Greenhushing, Greenrinsing and Greenlighting strategies.  

1 J Riding (2022), FCA to clamp down on real estate greenwashing, React News
2 J Willis et al. (2023), the Greenwashing Hydra, Planet Tracker
3 J Willis et al. (2023), the Greenwashing Hydra, Planet Tracker

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