The SEC cracks down on greenwashing

https://www.semafor.com/article/09/21/2023/the-sec-cracks-down-on-greenwashing

by mfiguiere • 3 years ago

169 48 3 years ago

Greenwashing is ridiculously prevalent and fueled by non-profits selling carbon credits that imo are likely knowingly engaging in fraud.

Most cap-and-trade carbon markets luckily refuse to accept these carbon credits, but they are still commonly used in ESG and claims of carbon neutrality.

boringg8• 3 years ago

There's more nuance than your absolute stance. There are a wide variety of quality of carbon credits - some systems are much more reputable than others - same with project types. Industrial and regulatory grade credits are legit. Voluntary third party retail carbon credits not as legit.

skyfaller• 3 years ago

Cory Doctorow made a pretty good case that carbon offsets are a market for lemons, where good credits will inevitably be driven out of the market by bad credits. After all, it's always cheaper to do nothing than to do something (if you're not considering negative externalities, or the long term). https://pluralistic.net/2020/12/12/fairy-use-tale/#greenwash...

whimsicalism6• 3 years ago

Give me an example of a deforestation credit that is legit and “industrial and regulatory” grade.

AFAICT any credit that relies on abatement could easily do a randomized controlled trial to measure how effective they actually are. The fact that they don’t absolutely reeks to high heaven.

kazinator• 3 years ago

If you don't actually follow your money to validate that it was used to remove as much carbon from the atmosphere as claimed, you have no way of knowing whether it's a scam or not.

It's not like purchasing supplies actually needed for your business, where you usually know when something is not delivered or not up to spec.

Still, bogus jet engine parts can find their way into airliners.

HideousKojima• 3 years ago

The second largest (on paper, at the time) biodiesel credit producer in the US was completely fraudulent:

https://www.reuters.com/article/epa-biofuels-lawsuit/trading...

And he wasn't caught because the EPA did their jobs (they didn't). He got caught because he bought a ton of sports cars and his neighbors assumed he was a drug dealer or something similar and got local PD to start investigating.

Edit: there was an episode of American Greed about it too - https://m.imdb.com/title/tt6806100/plotsummary/?ref_=tt_ov_p...

boringg8• 3 years ago

Biodesel credits != Carbon Offsets

imchillyb2• 3 years ago

Carbon Output became the metric.

That measurement was/is gamed, and has become worthless as a metric.

There are currently no viable metrics to use which won’t be gamed.

The statement: ‘Carbon Neutral’ is currently meaningless.

RetroTechie2• 3 years ago

"The statement: ‘Carbon Neutral’ is currently meaningless."

That's overly broad.

If a factory takes in raw materials, outputs products, does so using 100% renewable power (like rooftop solar), and doesn't otherwise release greenhouse gasses in the process, then "carbon neutral factory" would be a reasonable claim.

Of course that does not say anything about greenhouse effects of producing the input materials, use of that factory's products, or effects of the logistics involved.

So, more accurate: GHG emissions is a complex subject. And there's better or weaker ways to do the accounting.

imchillyb2• 3 years ago

If any part of that chain of product utilizes a non-zero carbon footprint then that entire chain of product and services IS NOT NEUTRAL, cannot be neutral, and is disingenuous to say otherwise.

Unless the entire chain is neutral, one node being neutral is meaningless.

jihadjihad• 3 years ago

TFA doesn't link to the SEC page that details the amendments made to the "Names Rule", but it can be found here: https://www.sec.gov/sec-enhances-rule-prevent-misleading-or-...

yaky• 3 years ago

That’s good news. Last time I looked, too many of the advertised “clean” and “green” ETFs were dominated by big tech (and other with questionable indirect impact on the environment), but it made those ETFs look more appealing in terms of returns.

Some notable exceptions: $ETHO - very diversified $FAN - wind $TAN - solar $RNRG - renewable utility companies

logicalmonster• 3 years ago

For us mortals who don't read every single SEC document, what is the criteria used to determine if something is "green" or not? I could come up with a few examples of where a green label may or may not be really misleading.

mistrial92• 3 years ago

about 20 years ago, there emerged a dozen standards of various kinds. They could be grouped with the amount of rigor in the reporting, and costs to the company.. then the jurisdiction .. US versus International for example. It would be interesting to hear from the SEC document readers about how that worked in practice, to get to today..

WalterBright4• 3 years ago

The straightforward thing to do is tax the carbon atoms in fuels.

Carbon credits, carbon footprint, biofuels, ESG investing, etc., are all nonsense.

RetroTechie2• 3 years ago

Imho it would be optimal to make that a generalized 2-way tax:

Any (primary sector) activity that results in greenhouse gas emissions: pay up. And recurring as long as activity is ongoing.

Activity that stores carbon: receive money. But only after the carbon is stored. Not for paper projects based on future estimates.

Preferably applied at the source (like, where oil is pumped, or land use changes) since that's easiest to audit.

dredmorbius2• 3 years ago

The problem with any of these measures is leakiness, particularly in light of global fuels trade, emissions, and global warming impacts.

I somewhat agree that taxing fossil fuels directly is the most direct route, though that faces a number of challenges:

- There's no one single global tax authority. Several of the largest fossil fuel extractors (China, India, Indonesia, for coal, Saudi Arabia, Russia, and China, for oil, and Russia, Iran, Qatar, and China for natural gas) would tend to be noncompliant with such impositions.[1]

- Outsourced manufacturing means that a secondary tax on imports of goods or services by carbon emissions would likely be necessary. I'm not sure how this would comport with existing trade treaties.

- Taxes would hit low-income countries much harder than rich ones. This is one of the common sticking points for virtually all emissions- and limits-based interventions, and has been since the 1970s if not earlier.[2]

- Any such taxes would have to be adjusted based on actual atmospheric greenhouse gas concentrations. Not merely CO2 but other emissions as well. Effectively the goal is to set a net emissions and warming budget and adjust a tax scheme to achieve that.

- Black markets would undoubtedly emerge, though the scale of such markets would make detection relatively straightforward. The more likely complication is that major actors (the US, China, Russia, India) are nuclear states, and direct interventions would entail their own risks.

- As wealth is power[3], the passing, adoption, and enforcement of such a tax would likely be highly challenging.

I don't have much by way of alternative suggestions, but I do somewhat agree that a direct economic mechanism aimed at the source would be preferable.

________________________________

Notes:

1. Five largest extractors each are, coal: China, India, USA, Indonesia, Australia; oil: USA, Saudi Arabia, Russia, Canada, China; natural gas: USA, Russia, Iran, Qatar, China, sourced from BP Statistical Review of World Energy 2022.

2. Excellent contemporaneous discussion of this in William Ophuls, Ecology and the Politics of Scarcity, 1977, particularly Chapter 7. <https://www.worldcat.org/title/2524932> <https://archive.org/details/ecologypoliticso0000ophu>

3. See: Hobbes and Adam Smith.

WalterBright4• 3 years ago

Just tax the carbon content of fuels sold in your country.

Then use diplomacy to get other countries to do the same.

jrochkind12• 3 years ago

For those interested, a podcast episode from 2021

The Smoke and Mirrors of ESG Investing with Tariq Fancy

https://capitalisnt.com/episodes/the-smoke-and-mirrors-of-es...

Environmental, social and governance investing, also know as ESG, has exploded in recent years. It promises to help us solve problems like climate change and inequality all while allowing investors to still turn a profit.
But BlackRock’s former global chief investment office for sustainable investing, Tariq Fancy, says it isn't what's being advertised. Recently, he penned a blog post claiming that not only are ESGs not making societal problems better, they may actively be making them worse.

gs17• 3 years ago

https://medium.com/@sosofancy/the-secret-diary-of-a-sustaina... seems to be the blog post they're talking about.

ahzhou• 3 years ago

I’ve never understood ESG funds.

1) It’s hard to reliably turn ESG goals into fair (non-gameable) portfolio metrics to incentivize funds

2) LPs still want funds to make returns, so even if they define good metrics, they still want most of the incentive to be based on returns.

3) ESG companies don’t post better returns than those from other asset classes.

It makes more sense for LPs put their money into non-ESG funds and just set aside some amount to achieve ESG goals through a charity with established metrics. They’ll get a tax break to boot.

jrochkind12• 3 years ago

i think your thinking is not too dissimilar to Tariq Fancy's.

The additional twist, of course, is that if you pretend you're doing ESG, you might attract investors to your fund that otherwise would have gone to another fund... while actually supporting the ESG goals a lot _less_ than if you just donated money to them as you suggest, while also conveying the idea that profit-oriented investing can motivate corporate behavior toward ESG goals instead of requiring government policy, which is yet another win if you actually don't want to sacrifice any profit for ESG goals and don't want any government regulation, so.... "everyone" wins?

Yizahi• 3 years ago

I wish someone would ban all "zero emissions" and "zero carbon" branding, plus issued a hefty fines for all "green" and "clean" branding. For being dishonest liars.

nologic01• 3 years ago

In accounting and finance as it has developed over centuries the only thing that is being seriously tracked and verified is money. Which is an intangible that is entirely oblivious of the actual state of the world (except ofcourse that in the eventuality where there is no world everything goes to zero).

It will take maybe decades before we start tracking and verifying real sustainability metrics. Until then we'll be swimming in a greewashed goo and hoping for the best.

ingen0s• 3 years ago

Get 'em!

bedhead• 3 years ago

ESG is entirely bullshit, why shouldn't the marketing around it also be?

s-mon• 3 years ago

FINALLY

neonate• 3 years ago

http://web.archive.org/web/20230921144112/https://www.semafo...

https://archive.ph/DKqRu

gnicholas• 3 years ago

A Yale professor offers a nuanced perspective on the unintended consequences of ESG investing on this Freakonomics episode: https://freakonomics.com/podcast/are-e-s-g-investors-actuall...

The SEC cracks down on greenwashing

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