Greenwashing, Accountability, and the Asset Manager Reckoning: A New Era for Climate-Conscious Finance
- aolearydirectorser
- Aug 27
- 4 min read
Author:
Dr Fabiola Schneider,
Co-Lead @ GreenWatch;
Assistant Professor in Accounting & Ad Astra Fellow,
University College Dublin (Quinn School of Business)
In a world where the battle against climate change is not just a moral imperative but a financial necessity, the tolerance for vague sustainability promises and misleading environmental claims is rapidly fading. Nowhere is this shift more visible - and more consequential - than in the financial sector, where asset managers are facing a rising tide of scrutiny and potential sanctions for failing to take climate action seriously.
Brad Lander, New York City’s comptroller, issued a stark warning to asset managers who fail to align with the climate objectives of the city’s $235 billion in pension funds. His message: deliver credible net-zero plans, or risk losing the business. Indeed, the UK’s People’s Pension fund recently pulled a £28 billion ($37 billion) mandate from State Street, citing an inadequate sustainable investment policy. A broader coalition managing $1.5 trillion has warned that asset managers must step up or lose access to their capital.
While the winds in the US have shifted, Europe is still moving forward with its climate ambitions. The UK’s People’s Pension fund mandate went to French Asset Manager Amundi. In Ireland, one of the new sovereign wealth funds, the Infrastructure, Climate and Nature Fund (ICNF) which the finance ministry estimates to grow to around 14 billion euros by 2030, specifically aims to fund expenditure on climate and nature projects.
Sustainable investing is no longer niche; it’s
mainstream. Asset managers, institutional investors, and even retail traders are increasingly aligning their portfolios with environmental, social, and governance (ESG) principles. But without reliable data, investors can end up supporting companies whose sustainability claims don’t hold up under scrutiny.
Greenwashing - where companies embellish or fabricate their environmental efforts - has long plagued markets. It misleads investors, distorts capital flows, and masks the real progress (or lack thereof) toward global climate goals. But the stakes are even higher when those doing the greenwashing aren't just companies, but the gatekeepers of trillions of dollars: the asset managers.
The Persisting Risk of Greenwashing in Financial Markets—and How AI Is Fighting Back
The core of the problem lies in the data - or lack thereof. Much of the ESG information available today is self-reported, unaudited, and inconsistent. This patchwork system enables companies to cherry-pick positive metrics and omit inconvenient truths.
As climate concerns gain momentum, sustainability has become a buzzword in boardrooms and marketing campaigns alike. Companies across industries are racing to showcase their environmental credentials, eager to attract eco-conscious consumers and investors. But behind the glossy reports and green-coloured branding, a troubling trend persists: greenwashing.
Regulatory frameworks are ushering in a new era of transparency. The EU Green Taxonomy classifies economic activities based on six environmental objectives, providing a consistent benchmark for determining what qualifies as "sustainable". The Sustainable Finance Disclosure Regulation (SFDR) sets out how financial market participants disclose sustainability information, and the ESMA Naming Guidelines provide rules on funds’ names when using ESG or sustainability-related terms. For example, funds using sustainability-related terms should exclude all companies that derive 1% or more of their revenues from exploration, mining, extraction, distribution or refining of hard coal and lignite (and 10% for oil, and 50% for gas).
These changes are monumental. They don't just improve data quality - they help level the playing field for genuinely sustainable businesses and give investors the tools they need to make informed decisions.
AI to the Rescue: GreenWatch & the Future of ESG Analytics
While regulation is a critical step forward, it’s not a silver bullet. The sheer volume and complexity of ESG data make it nearly impossible for human analysts to catch every instance of greenwashing and assess risk across large portfolios. This is where artificial intelligence (AI) comes in.
Enter GreenWatch.AI, an AI-powered tool designed specifically to detect greenwashing. Built for the financial services sector, GreenWatch leverages machine learning to analyse corporate sustainability statements and compare them with hard emissions data. It provides a scalable, credible way to vet sustainability claims and avoid being duped by hollow promises.
The GreenWatch tool evaluates two core metrics: the boldness of corporate sustainability claims and actual greenhouse gas performance. By scoring executive-level statements and matching them against a company’s emissions record, GreenWatch identifies discrepancies that may suggest greenwashing. A bold claim unsupported by concrete action becomes a red flag - one that investors, regulators, and policymakers can act on.
Moreover, GreenWatch adopts a “human-in-the-loop” approach. Expert analysts review AI-generated insights to ensure they are contextually accurate and meaningful. This hybrid model combines the speed and scale of AI with the judgment and experience of human experts.
The Road Ahead .....
Greenwashing won’t disappear overnight. But with AI tools like GreenWatch and stronger regulatory oversight, we are better equipped than ever to hold companies accountable. By exposing discrepancies between words and actions, these innovations can redirect capital toward businesses truly committed to sustainability - and away from those that are all talk.
In the financial markets, trust is currency. If greenwashing goes unchecked, we risk eroding that trust and stalling the global transition to a low-carbon economy. But if we rise to the challenge with technology, transparency, and a relentless demand for integrity, we can build a system where sustainability isn’t just a story - it’s a standard. In the age of climate urgency, the time for greenwashing is over. It’s time for accountability, powered by data.
Come and Hear More .....
Joint In-Person Event as part of “2025 UN Sustainable Development Goals Week”
“Greenwashing Uncovered: Accountability, Transparency & Responsibility”
When? Tuesday, 23rd September, 6-8pm
Where? UCD, Lochlann Quinn School of Business, Dublin 4
If you wish to attend, please REGISTER here
Dr. Fabiola Schneider, Co-Lead GreenWatch, Assistant Professor in Accountancy
University College Dublin