A Greenwashing Index

Elise Gourier and Mathurin, Hélène

No 18831, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We construct a news-implied index of greenwashing. Our index reveals that greenwashing has become particularly prominent in the past five years. Its increase was driven by skepticism towards the financial sector, specifically ESG funds, ESG ratings and green bonds. We show that greenwashing impacts investors' behavior. Unexpected increases in the greenwashing index are followed by decreases of flows into funds advertised as sustainable, both for retail and institutional investors. They furthermore bias the estimation of stocks' beta on climate risk, distorting the estimated climate risk premium. When accounting for greenwashing, the climate risk premium becomes small and statistically insignificant.

JEL-codes: G11 G12 Q51 (search for similar items in EconPapers)
Date: 2024-02
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