Own ANZ (ASX:ANZ) shares? Here’s what the bank’s CEO is warning on ‘greenwashing’

Ever more investors are investing with ESG principles in mind. But how do you know an investment is really ‘green’?

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Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are slipping in morning trade, down 0.39%.

The share price has been bouncing around the $28.15 level this week. Over the past 5 days ANZ shares have slipped 0.11%.

That’s the recent price action.

Now here’s ANZ’s CEO Shayne Elliot on the flood of investor money seeking ‘green’ investments.

When green may not be green

Ever more investors are looking to invest their money into companies with strong environmental records. Companies that have plans in place to reduce their carbon footprints. And, increasingly, companies that can show how they intend to get to the environmental Holy Grail – net zero – by 2050.

Most investors seeking ‘green’ investments are still looking for healthy returns. But they also like the idea that their money is supporting companies committed to doing their part in limiting climate change.

The question then becomes, how do you know if a company’s environmental credentials are all they appear?

According to Shayne Elliot, that’s not always easy.

Elliot said (quoted by the Australian Financial Review):

Clearly, one of the risks at the moment is there is too much money out there, the risk of greenwashing, of trying to cobble together things to give it some sense of ‘greenness’ to satisfy that massive level of demand.

The onus is on a lot of us to make sure we keep our standards high, making sure we have an agreement across the economy and the sector around taxonomy and definitions.

Elliot suggested that a big step forward would be increased cooperation between the banking and insurance sectors:

The insurance industry has a much better, nuanced understanding given what they do, and banks are really good at financing transitions and change. When you bring the two together, that is a very powerful combination for the financial sector because we can learn a lot from insurance industry, thinking about long-term impacts.

One of the potential pitfalls of having so many investors chasing ‘green’ investments is a potential lack of funding for crucial transitional projects. Along with the higher mid-term risks that can comes with investing in renewable energy projects.

“We need new forms of capital taking different types of risk to bridge some of this. There is too much money running around looking for ‘green’ investments” Elliot said.

As the AFR reported, he pointed to the work the Clean Energy Finance Corporation (CEFC) does in “de-risking renewable energy project financing for banks”:

What we want is money taking a slightly different risk approach – exactly what CEFC is doing – funding bottlenecks and glitches in the system that make it hard for private money to be allocated and how do we de-risk that … Private money will follow very quickly when those things are sorted through.

What is ANZ’s sustainability policy?

ANZ, according to their website, stands behind the goal of achieving net zero emissions within 30 years:

We are focussing our efforts on energy, water and waste due to their relevance to the customers we bank and the markets in which we operate. We are supporting household, business and financial practices that improve environmental sustainability…. We support the Paris Agreement’s goal of transitioning to net zero emissions by 2050 and are committed to playing our part.

How have ANZ shares been performing?

Over the past 12 months, ANZ shares are up 44%. That’s more than twice the 20% gains posted by the S&P/ASX 200 Index (ASX: XJO) over that same time.

The ANZ share price has gained 4% over the last month.

Should you invest $1,000 in ANZ right now?

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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