INVESTING EXPLAINED: What you need to know about greenhushing

In this series we debunk the jargon and explain a popular investment term or theme. Here it is green hushing.

What is this?

The recent increase in use of the term “greenhushing” has led to some corny jokes about telling plants to stop talking back.

But the term refers to the increasingly common practice of staying silent about your company’s climate and other ethical commitments. This is partly driven by fears of accusations of ‘greenwashing’ – making false claims about ecological virtues.

Are such fears justified?

Yes. In 2022, authorities raided the offices of DWS, Deutsche Bank’s asset management arm, following reports that it was exaggerating the proportion of its funds invested according to ESG (environmental, social and governance) criteria.

DWS was subsequently investigated by the German mainstream Bafin and by the American watchdog SEC. Last month it was reported that the company – which faces a $25 million SEC fine – has been hit with a new investigation into the matter.

Other reasons why it’s in the news?

This month, two major money managers – JP Morgan Asset Management and State Street Global Advisors – left the Climate Action 100+, the world’s largest climate change pressure group. The groups manage $3.1 trillion and $4.1 trillion in funds, respectively. Their departure sparked a debate about their motives.

So why did they leave?

Some argue that fund managers only join such associations when there is a marketing advantage. Paying lip service to sustainability commitments is seen as a way to win business from private and institutional shareholders.

Others cite the US backlash against ESG investing, which is seen in some quarters as not only dangerously “woke” but also damaging to jobs and the economy. Objections from some states are increasing and there are warnings of painful consequences for ESG-oriented managers if Donald Trump wins the election.

Is anti-ESG sentiment growing in Britain?

Opposition to ESG is more muted than in the US, but it is significant that Labor has scaled back its plans in this area. The party has said it will spend around £15 billion a year, down from £28 billion, on battery production, flood defenses, hydrogen energy, insulating homes, offshore wind projects and planting more trees. Meanwhile, the government is considering stricter controls on the ESG ratings sector.

Does this mean more green hushing?

Almost certainly. A lot of attention has been paid to the statements of the American giant Blackrock, which is the custodian of $ 9.1 trillion in savings.

Larry Fink, the boss of Blackrock, is seen as the poster child for ESG investing. But the group is now less vocal on the issue, likely because it hopes to escape the censure of Republican politicians.

But Blackrock’s commitment to saving the planet appears unchanged and the international division remains a member of Climate Action 100+.

Does this signal broader shifts in ESG investing?

In Britain, many private investors have been moving money out of ESG funds.

This will likely lead to a rebranding, with funds having more limited objectives that focus on stewardship and sustainability.