Investing today is no longer just about returns. More people want their money to make a positive impact, not only on their wallets, but on the world. This shift has fuelled the rise of ESG investing, a movement that combines financial performance with environmental, social, and governance values.
ESG stands for Environmental, Social, and Governance, the three pillars that measure how responsible a company really is. Environmental looks at issues like carbon emissions, energy use, and biodiversity. Social examines labour practices, equality, and community impact. Governance considers ethics, transparency, and how companies are managed.
But there’s a problem: as ESG investing has gone mainstream, greenwashing has followed.
Greenwashing happens when companies or funds claim to be sustainable or ethical, but fail to live up to it. In finance, it means using the language of sustainability as a marketing tool, without genuine action or measurable results.
The ESG boom in Singapore and why greenwashing is a growing risk
In Singapore, green finance is gaining momentum. Investors are keen to back funds that align with their values, and regulators such as the Monetary Authority of Singapore (MAS) are tightening standards to ensure transparency.
The goal is to prevent misleading marketing and make sustainability claims more credible. Yet greenwashing remains widespread. Some “low-carbon” funds still hold shares in major fossil-fuel producers.
Others highlight a few green assets but leave the rest of their portfolios untouched. With ESG-themed products multiplying, distinguishing genuine sustainability from clever branding has never been tougher.
Read more: Go Green or Go Home? Sustainable Investing is Here to Stay
What exactly is greenwashing in finance?
Greenwashing in finance happens when an investment fund or ESG fund gives the impression that it is sustainable, ethical, or environmentally responsible, even though its actions or investments do not support those claims. It is like making an investment look green without actually changing what is inside.
A company or fund might promote itself as part of the sustainable investing or ethical investing movement, but still hold shares in industries such as oil, coal, or unsustainable agriculture.
The goal is often to attract investors who care about ESG investing or responsible investment, people who want their money to make a difference for the planet and society. Unfortunately, some funds use this as a marketing tactic rather than a genuine strategy.
Here are a few signs of greenwashing in ESG investing:
- Vague or feel-good language such as “climate aware”, “impact-driven”, or “responsible investing” with no explanation or measurable results.
- Cherry-picked data that highlights small positive steps while ignoring bigger, unsustainable activities.
- Misleading labels such as a “fossil-free” or “green fund” that still invests in oil, coal, or other high-emission companies.
In simple terms, if an ESG fund or green investment fund sounds more like marketing than a clear sustainability plan with evidence, it may be greenwashing. Investors should always read beyond the buzzwords, ask for proof, and check how the fund’s money is actually invested before committing.
Real examples of greenwashing
This issue is global, and Singapore is not immune.
- WisdomTree (U.S.): In 2024, WisdomTree, a major U.S. asset manager, was fined USD 4 million for claiming certain funds excluded fossil fuels and tobacco when they did not.
- DWS Group (Germany / Europe): DWS Group, one of Europe’s largest investment firms, faced investigations for overstating the amount of “sustainable” assets it managed.
- ESG-labelled funds that aren’t Paris-aligned: According to a 2024 InfluenceMap study, more than 70% of ESG-labelled funds were not aligned with the Paris Agreement climate goals. Some even held oil and coal companies among their top positions.
- Singapore’s palm oil problem: Closer to home, several Singapore-linked palm oil firms have been accused by environmental groups of promoting “sustainability” while contributing to deforestation.
These cases show why investors must look beyond glossy brochures.
Why ESG ratings don’t always tell the truth
Many investors turn to ESG ratings to guide their decisions. Unfortunately, these ratings are inconsistent and often misleading. Different agencies use different methods and priorities, and there’s little regulation to ensure consistency.
The result? The same company can score “A” from one agency and “C” from another. That confusion stems from several problems:
| Problem | Why it matters |
| Different rating systems | Each agency weighs environmental, social, and governance factors differently. |
| Unverified, self-reported data | Many companies disclose only what they choose, without external auditing. |
| Lack of standardisation | Unlike credit ratings, ESG ratings lack uniform global standards. |
In short, relying on one ESG rating can be as risky as judging a restaurant by its own menu photos.
How to tell if an ESG fund is genuinely sustainable
So, how can you tell whether your “green” fund is truly ethical or just well-marketed? Here’s what to do.
1. Start by reading beyond the buzzwords
Look for details, not slogans. A credible sustainable fund will set clear, measurable targets, such as cutting carbon emissions by a defined percentage, and it will regularly report progress. If you only see vague commitments, dig deeper.
2. Check the fund’s top holdings
Most fund websites publish these. If a supposedly eco-friendly fund includes oil, mining, or airline companies among its largest positions, that’s a red flag.
3. Look for third-party verification
Reliable ESG or ethical investing funds usually have independent audits of their sustainability claims or follow a recognised framework, such as the EU Taxonomy or Singapore’s Green Finance Taxonomy.
4. Be cautious about “rebrands”
Some funds simply change their name to sound greener without adjusting their strategy. Always compare a fund’s holdings and objectives before and after any rebrand.
5. Be wary of net-zero claims
These net-zero claims rely too heavily on carbon offsets rather than actual emission reductions. Real impact comes from change, not compensation.
Types of ESG investments that actually make a difference
Sustainable investing isn’t all hype. There are genuine options that align purpose with performance.
- Thematic impact funds focus on clear issues such as renewable energy, waste reduction, or sustainable agriculture. Their impact is easier to measure.
- Green bond funds direct capital towards environmental projects like clean transport or solar farms, with transparent reporting on how funds are used.
- Active engagement funds use shareholder power to push for better corporate behaviour rather than simply avoiding bad companies.
- For more experienced investors, custom ESG portfolios allow you to define what sustainability means to you and exclude sectors you don’t support.
Read more: ESG Investing: Our Guide to Socially Responsible Investing
Quick checklist for spotting a truly green fund
- Clear and measurable ESG goals
- Transparent, third-party verified reporting
- Consistent exclusions (e.g. fossil fuels, tobacco, controversial weapons)
- Real impact metrics, not just promises
- Up-to-date holdings that match the strategy
- Honest disclosure of setbacks as well as successes
If a fund checks these boxes, it’s more likely to be genuinely sustainable.
Actionable next steps for Singapore investors
- Visit a fund’s website and download its latest fact sheet. Review its top 10 holdings and stated ESG strategy.
- Ask the fund manager direct questions, such as:
- “Who verified your sustainability data?”
- “How much of your portfolio is aligned with the Singapore Green Finance Taxonomy?”
- Compare funds using multiple ESG rating sources and look for consistency.
- Use MAS guidelines to check whether the fund’s sustainability claims meet local standards.
- Regularly review your portfolio. ESG investing is dynamic, companies evolve, and so should your choices.
The bottom line
ESG investing can deliver real-world impact, but only when done honestly. Greenwashing thrives on investor complacency, so the best defence is curiosity and scrutiny. Ask tough questions, read the fine print, and verify claims.
Remember, truly sustainable investing is not about perfection. It’s about progress with transparency. When you choose funds that prove their impact, not just promote it, you’re investing for both profit and purpose.
