Greenwashing in ESG Investment Strategies: Implications and Solutions for Financial Markets

Yifan Yu ()
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Yifan Yu: The University of Sydney, Business School

A chapter in Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025), 2025, pp 274-282 from Springer

Abstract: Abstract Sustainability is transforming the financial market from traditional risk-return focus to valuing environmental, social, and governance (ESG) factors when making investment decisions. However, greenwashing has been detected as a common practice in this process, where financial companies tend to exaggerate or misrepresent their ESG practices. This behaviour undermines the integrity of financial markets and reduces investors’ confidence towards sustainability development. This paper examines the first greenwashing case brought by the Australian Securities and Investments Commission (ASIC) against Mercer Superannuation (Australia) Limited. Through analysing the case with literature review and industry data support, the paper identifies three main reasons for greenwashing, including ambiguity in sustainability concepts and disclosures, inadequate internal governance, and insufficient regulatory oversights. To address these challenges, it is recommended to improve the roles of board of directors, leverage artificial intelligence, and strengthen regulatory framework. The combination of both internal and external endeavours contributes to the transparency, accountability, and consistency in ESG disclosures, which can help improve investors’ trust and promote sustainable development of financial market in the long-term.

Keywords: ESG; Greenwashing; Sustainable finance; Investment (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-748-9_31

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DOI: 10.2991/978-94-6463-748-9_31

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