“Competence Greenwashing” is a business risk

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Here’s a note from Alex Edmans:

Competence Greenwashing is a major risk not just for ESG, but business as a whole. It includes: (1) Professors jumping on the ESG bandwagon to launch ESG courses or write ESG books, with limited academic expertise or practitioner experience (thus being unaware of how mixed the evidence is, and how complex the trade-offs are), or (2) Practitioners calling themselves ESG experts on the back of elementary ESG certificates, often taught by such professors. This excellent article by Kim Schumacher, highlights the dangers of this trend. The Conclusion recommends that companies avoid:

• Adding “ESG,” “Climate,” or “Sustainability” to the job titles of existing executives/directors/managers/analysts.

• Creating token sustainability, climate, or ESG positions, often promoting someone remotely related to corporate social responsibility just to respond to market-level or reputational pressures or appointing big names “Head of ESG/Sustainability” or “Chief Sustainability Officer” without solid material ESG track records or genuine sustainability expertise.

• Recruiting “ESG experts” who only completed online introductory ESG certificate courses that are not equal to subject matter expertise in areas like climate change, biodiversity, or ecosystems.

• Creating climate service, ESG, or sustainability teams that lack disciplinary diversity at the skill level, as such teams require expertise in addition to financial, management, and business skills. An equal amount of non-financial scientific expertise is needed to properly assess climate- and nature-related risks and impacts.