ESG interest on the rise, but so is fear of greenwashing

By Katie Keir | June 11, 2021 | Last updated on December 6, 2023
3 min read

Amid record sustainable fund flows and a flurry of new products, investors are becoming more interested in environmental, social and governance (ESG) issues, but also wary of greenwashing.

Sucheta Rajagopal, a portfolio manager with Toronto-based Research Capital Corp., has specialized in responsible investment for years, but she’s now seeing “huge demand,” she said Friday at the Responsible Investment Association’s (RIA) 2021 virtual conference.

But while clients are increasingly interested in sustainability issues and ESG investing, they remain concerned about greenwashing, said Ian Robertson, vice-president, director and portfolio manager with Odlum Brown, speaking on a separate panel at the RIA conference. Greenwashing involves products giving false or misleading statements about how sustainable the fund is. 

Client questions about greenwashing revolve around two main issues, Robertson said: the ESG process itself — for example, exclusionary screens or ESG integration and company engagement — and individual company names within a portfolio. 

“[Investors] have an idea of whether [an individual security] is suitable for a responsible investment fund based on their perception of what a company does and how it behaves in the community. They will look at some [holding] and ask, ‘How did that get in there?'” Robertson said. “So, it comes down to an education about the [ESG] process and making sure that client expectations are aligned with [that] process.” 

Michelle de Cordova, principal of ESG Global Advisors Inc., agreed that it can be challenging for an advisor to “marry up a client’s personal feelings, memories and so on, about a particular company” against objective research suggesting a company is performing relatively well against ESG screens. 

Ultimately, if a client can’t live with a particular company name in a portfolio or in a fund, it may be best to remove it or find a more suitable product, Robertson said.  

While it may be more difficult to find a fund that matches your client’s sustainability values and principles, “it certainly can be done and the labelling and availability of [ESG] products is getting much better every day,” he said.

Carol Smith, an MFDA advisor at Lévis, Que.-based Desjardins Financial Security Independent Network, told the virtual audience on Friday morning that it’s crucial to help investors understand that there are no perfect companies, funds or processes.

While environmental concerns have driven much of the interest in ESG investing, Rajagopal said clients are becoming more aware of the “S” factors in investments. Alongside climate risks, clients are asking about issues like workplace safety and companies’ social efforts (e.g., how grocery stores have treated their employees during lockdowns), she said.

Clients are “connecting what’s going on in their lives with [the practices of] publicly traded companies to an extent I have not seen before,” she said, and advisors can build on that engagement with proactive ESG conversations.

Despite the growth in ESG investing, Rajagopal said certain perceptions persist, such as “the zombie myth” of ESG underperformance — even after strong returns over the past year.

She also warned advisors against discussing ESG topics they’re not passionate about. “Clients sense that,” she said. “Are you just absorbing a whole bunch of information and regurgitating it, or do you really care about what you’re offering?”

Advisor’s Edge and Investment Executive are media sponsors of the RIA conference.

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Katie Keir

Katie is special projects editor for and has worked with the team since 2010. In 2012, she was named Best New Journalist by the Canadian Business Media Awards. Reach her at