The renewable energy industry has exploded recently, especially after California passed the Global Warming Solutions Act of 2006, requiring 33% of the state’s electricity to come from renewable sources by 2020. An electric car manufacturer called Tesla Motors recently started selling cars equipped with solar panels on the roof, promising to help drivers save money while promoting renewable energy at the same time; they certainly aren’t the only ones making these claims. Other companies like DuPont and General Electric have launched similar initiatives to incorporate more green practices into their businesses. But are companies like Tesla contributing to the fight against climate change and pollution?
Are Investors Being Fooled by Renewable Energy Firms?
It’s become increasingly easy for companies to market themselves as green, especially those in renewable energy. In fact, a recent report from Pew Research Center shows that a majority of Americans believe such firms are making an effort to reduce their environmental impact. But are they living up to those claims? It can be difficult to tell, especially when some go out of their way to hide behind misleading labels and organizations. Here are a few ways your friendly neighborhood green energy company might fool you.
What Is Greenwashing?
A lot of renewable energy businesses will claim to be environmentally friendly and promote themselves as sustainable when in reality they aren’t. Businesses will use buzzwords like eco-friendly or green power and add them to their marketing campaigns to get customers to buy products from them, even though they don’t follow through with actions that prove their claims.
When businesses, individuals, or governments exaggerate or falsely advertise their green credentials, it is known as “greenwashing.” Over the past year, the phrase has changed to refer to problems that arise when companies misrepresent their ESG commitments.
Actively, when it comes to putting a stop to such potential misselling, the European Securities and Markets Authority is one of the front-runners. ESMA, the European Union’s securities market regulator, issued a framework to promote uniformity across the EU in the supervision of investment funds with sustainability elements. And that covers all stock, bond, and other types of funds, as well as provisions to stop greenwashing in money market funds.
Red Flags for Firms with Questionable Environmental PracticesConsumerss are paying more attention to companies’ green energy practices these days. Many consumers want to support companies that invest in and support renewable energy, so they take notice when a firm talks a big game about being environmentally friendly but doesn’t follow through. If a firm boasts a lot about its environmental focus, then fails to back up its claims with action or results—red flags go up.
The Challenges of Measuring Renewables as Clean
Just because a company claims its electricity comes from renewable sources doesn’t mean it’s clean energy. In fact, some power plants fueled by biomass or natural gas actually produce more emissions than coal-fired ones. That’s why it’s essential to dig deeper into how utilities are accounting for their emissions and track their carbon footprints over time.