Over the past decade, many organizations have improved their carbon footprints, from recyclable and biodegradable packaging and single-use plastic to planting trees and reducing their greenhouse gas emissions. However, some businesses and companies looking to boost their eco-friendly image without committing to serious changes and addressing environmental issues have been associated with false green marketing. We call this "Greenwashing."

What is Greenwashing?

Greenpeace and the Environmental Protection Agency define greenwashing as making false and misleading claims about a product's environmental benefits or practices, services, technology, or company practices. Greenwashing typically involves companies spending more money on advertising and marketing than on implementing sustainable business practices that minimize environmental impact. These false green claims can deceive consumers into believing that a product or company is more environmentally friendly than it is, leading to increased sales and profits. As a result, false advertising, misleading initiatives, and groundless claims have increased green investors' exposure to risks emerging from potential lawsuits from activist groups, image deterioration, and some heavy loss in assets invested.

Why is Spotting Greenwashing Important?

Greenwashing is a growing concern for investors as they look to make sustainable and responsible investments. Therefore, spotting greenwashing practices is important for these firms. Here's why.

The deceptive practices used by greenwashers can have significant implications for the integrity of investments made in what investors believe to be sustainably operated companies or sustainable funds. In other words, greenwashing makes it difficult for investors to distinguish between genuinely committed to sustainability companies and those merely making false claims about their environmental practices. As a result, investors may unknowingly invest in companies that are not as sustainable as they claim to be, which can harm their financial returns and the environment. Therefore, it's essential for investors to be aware of greenwashing tactics and to carefully research companies before investing in them to ensure that their investments align with their values and contribute to a more sustainable future.

What Are the Challenges to Detecting Greenwashing?

It's challenging to produce an accurate assessment of environmental, social, and governance (ESG) factors, which gives companies the opportunity to cover or hide ineffective and fake green initiatives.
According to Regtank, some of the main challenges to detecting greenwashing practices are the following:

• Lack of reporting standards: some investors believe that we haven’t universally agreed upon a set of standards to determine whether a product is ESG compliant.
  
• Lack of transparency: greenwashing companies don’t disclose the specificities of their “green campaigns,” which makes it difficult for investors and consumers to fact-check and evaluate their sustainability claims.
• Limited consumer awareness: false marketing strategies could be based on a combination of the consumer’s eco-consciousness and brand loyalty. As a result, consumers become less aware of the misleading strategies greenwashing companies use to sell their products.

Ultimately, these factors may contribute to the inaccuracy and limitations of ESG data and scores, which makes it easier for greenwashers to get away with their false marketing campaigns. Consequently, detecting greenwashing requires scrutiny of environmental claims made by companies and an understanding of the complex supply chains and manufacturing processes involved in producing products and services.

To learn more about greenwashing and have access to real-life case studies, download this comprehensive report:

How Does Artificial Intelligence Detect Greenwashing?

As greenwashing practices increase, activist investors, experts, journalists, and even the general public are spreading awareness of the issue using social media, news outlets, forums, and blogs, among other means.
Recently, artificial intelligence (AI), particularly natural language processing (NLP), has proven to be effective in the early detection of greenwashing by analyzing vast amounts of qualitative data publicly available on the web. At SESAMm, for example, we apply our NLP capabilities to identify companies likely to engage in greenwashing practices by analyzing text in billions of web-based articles. Our data lake contains over 25 billion web–sourced articles, sourced from four million news, blogs, social media, and forum discussions on five million public and private companies in more than 100 languages. We run these articles through our AI platform tool, TextReveal®, and systematically craft reliable, timely, and comprehensive insights to detect greenwashing, generate ESG alerts, and identify related risks.

The Rise of Greenwashing

Greenwashing, the deceptive practice where companies claim to be more environmentally friendly than they actually are, has become a growing concern in recent years. By analyzing the frequency of web mentions of greenwashing over time, we can observe important trends and understand the factors contributing to this phenomenon.

Recent analyses indicate a significant increase in greenwashing mentions since late 2019. This rise aligns with a growing public awareness of the climate emergency and the increase in media outlets and social media accounts dedicated to exposing greenwashing. The number of mentions escalated from fewer than 200 to over 23,000 in the last quarter of 2023, highlighting the increasing scrutiny of corporate environmental claims.

A noteworthy pattern is the regular occurrence of spikes in greenwashing mentions during the third quarter over the past three years. This timing corresponds with the "pre-COP" periods, leading to critical international climate change management conferences. These periods see heightened discussions around sustainability, with increased attention on companies' environmental practices.

Greenwashing in the Energy Sector

The energy sector, particularly the oil industry, has faced significant scrutiny regarding greenwashing. In this context, companies like Shell and ENI have been prominent due to the frequency of greenwashing mentions associated with them.

For Shell and ENI, the volume of greenwashing mentions has fluctuated, with notable increases in specific quarters. For example, Shell saw spikes in mentions during the second quarter of both 2021 and 2022 while experiencing a drop in the third quarter of 2022. ENI has faced similar fluctuations, often linked to legal actions and publicized environmental issues.

Shell's Greenwashing Mentions, ESG Risks, and Initiatives

Shell, a British multinational and prominent player in this sector, has faced considerable scrutiny for such practices. The company has experienced notable spikes in greenwashing mentions and has been involved in several ESG-related risks.

Greenwashing Mentions

We can see an increase in greenwashing mentions in the first half of 2023. Around that period, Shell faced allegations and lawsuits concerning its environmental claims. The company was criticized for misleading U.S. authorities and investors about its energy transition efforts. Additionally, Shell faced public backlash for labeling fossil gas as 'renewable' while reporting record profits. A notable incident involved a shareholder suing Shell's executives over climate risks.

ESG Risks

Shell has faced several ESG-related risks, including legal challenges and pollution issues. In 2021, the company was sued by New York City over climate change-related advertising and filed an arbitration claim against Nigeria concerning a spill dispute. In March 2023, Shell faced another oil spill, this time in another region in Nigeria,  Rivers State, and also saw institutional investors backing a lawsuit against its board over climate risks. The mid-2023 period saw Shell agreeing to pay $10 million for air pollution violations at a Pennsylvania petrochemical plant. Despite its net-zero pledge, the company announced plans to increase fossil fuel production.

ESG Initiatives

Despite its challenges, Shell has also engaged in various sustainability initiatives. In late 2021, the company announced plans to purchase power from the world's largest offshore wind farm. Mid-2022 saw a leadership change with the company's CEO stepping down as Shell aimed to align with its climate goals. The company also planned to deploy 10,000 EV chargers across India as part of its global strategy. In mid-2023, Shell committed to investing $10–15 billion in developing low-carbon energy solutions. Although the company abandoned its lower oil production target, it maintained its commitment to reducing emissions.

Shell's journey underscores the challenges of aligning environmental claims with real actions, emphasizing the importance of transparency and genuine sustainability efforts.

ENI's Greenwashing Mentions, ESG Risks, and Initiatives

ENI, an Italian multinational oil and gas company, has faced scrutiny for such practices. The company has experienced fluctuations in greenwashing mentions and has been involved in a number of ESG-related risks.

Greenwashing Mentions

ENI's greenwashing mentions are fairly low. However, the company has been featured in discussions about greenwashing, especially with recent developments. In early 2022, the company faced criticism for inconsistencies in emissions data and greenwashing activities, as highlighted by the Sereno Regis Study Center. Greenpeace also criticized ENI for using the Sanremo Music Festival as a platform for greenwashing. In May 2023, ENI faced a lawsuit for allegedly lobbying and greenwashing to promote fossil fuels despite being aware of their environmental risks. Greenpeace sued the company, accusing it of knowingly contributing to climate change.

ESG Risks

Over the past 4 years, the oil giant's ESG risks have been few but not inexistent. ENI has encountered several risks, including legal challenges and pollution issues. In 2022, ENI's environmental strategy was deemed a failure, and concerns arose about a pipeline spill into the East Irish Sea. The company also faced legal actions in 2021, including an appeal against a court ruling in an illegal waste case and warnings from the Legality Network to reduce greenhouse gas emissions or face prosecution.

The company faced a lawsuit in early 2023 for allegedly having prior knowledge of the climate crisis. In another incident, a report found that ENI and Shell were responsible for significant pollution in Bayelsa, requiring a $12 billion cleanup.

ESG Initiatives

Despite facing ESG risks, it is visible that ENI has also pursued various sustainability initiatives. In early 2022, ENI and British Petroleum finalized an agreement to create a new independent joint venture in Angola, which will support the energy needs of Angola's growing economy and its decarbonization path and strengthen its role as a global LNG player. In late 2023, the company received Gold Standard recognition from the United Nations for its commitment to reducing methane emissions. ENI also partnered with Luiss University to launch an international network focused on African energy transition and collaborated with RINA to accelerate maritime decarbonization.
ENI has shown interest in renewable energy, as demonstrated by its wave energy project in Pantelleria and its plans for fusion energy in collaboration with Commonwealth Fusion Systems. The company also focuses on sustainable mobility, developing diesel from 100% renewable materials, and promoting clean energy through partnerships.

Shell and ENI both face the challenge of balancing economic interests with environmental responsibility. Despite allegations of greenwashing and environmental risks, both companies have taken steps towards sustainability, such as investing in low-carbon solutions and renewable energy projects. Their experiences highlight the importance of transparency, genuine commitment to environmental responsibility, and the role of public scrutiny in holding companies accountable.

Greenwashing and ESG Investing

In sum, certain companies advertise their sustainability and green initiatives, while in reality, they are making false claims and practicing greenwashing, as evidenced by our analysis using SESAMm's AI and ESG reports. We use AI through TextReveal to generate alternative data for use cases, such as ESG and SDG, sentiment, private equity due diligence, corporate studies, and more. Our technologies can reliably ensure the credibility of ecological initiatives and serve global investment firms, corporations, and investors, such as private equity firms, hedge funds, and other asset management firms, to enhance their investment strategies.

Conclusion

In conclusion, the issue of greenwashing represents a substantial obstacle in the journey towards genuine environmental sustainability, misleading consumers and investors and diluting the efforts of genuine sustainable enterprises. Nevertheless, the emergence of advanced technologies such as Artificial Intelligence (AI) and Natural Language Processing (NLP) indicated a new era of accountability. Innovators like SESAMm are at the forefront, deploying these technologies to effectively unravel and counteract greenwashing practices. This empowers investors, asset, and portfolio managers to discern and align their resources with legitimately sustainable entities. The call to action is clear: a collective demand for transparency and responsibility is crucial.

Reach out to SESAMm

TextReveal’s web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or to request a demo, reach out to one of our representatives.

The chemicals industry, often perceived as the backbone of modern economies, is undergoing a notable shift. With the world's focus now fixed on environmental, social, and governance (ESG) initiatives, this sector finds itself at the crossroads of risk and opportunity. In this “ESG Data Trends,” we dive deeper into the chemicals’ market ESG performance, studying the example of Ineos.

The chemicals industry: riding the ESG wave

Post-2020, the chemical market has seen an increase in web mentions. Several factors—from gas shortages rattling this energy-intensive market to escalating environmental concerns—have ushered in a new era of sustainability discussions. But which chemicals are stealing the limelight?
Chlorine, Ammonia, and Base Chemicals like Ethylene and Propylene account for over half of the chemical web mentions. And it's not just about their volume. The narrative is changing too. The industry is leaning towards eco-conscious production, championing innovations like recycled propylene, Renewable-Benzene, and Green ammonia.

What's interesting about this is the emphasis on ESG initiatives over ESG risks. It's a clear signal that the industry is taking action toward sustainability and is making tangible strides. When looking at the industry’s ESG risks mentions, we found that Arkema has the highest percentage of ESG Risks driven mainly by environmental incidents and impact on biodiversity due to a chemical plant explosion in 2017, followed by UOP LLC, which displays the highest proportion of Social related risks as a consequence of layoffs.

Conversely, across the industry, the volume of ESG initiatives indicates a significant commitment to sustainable related practices. Environmental-related practices are the most mentioned initiatives in the chemicals industry; precisely, two pillars stand out in ESG initiatives: climate change reduction and circular economy strategies. LyondellBasell displays the highest percentage of ESG initiatives mentions due to its climate change reduction and circular economy strategies, where the company is working towards greenhouse gas reductions and advancing plastic waste recycling. Despite having the highest environmental risk mentions, Arkema has the highest social-related initiatives with corporate social responsibility.

Case study: Ineos

The TextReveal Dashboard detected another chemicals company with an increasing number of mentions, the British multinational Ineos. After the announcement of Ineos Grenadier's off-roader in 2020, the number of mentions more than doubled, increasing Ineos' overall volume. Later on, the company’s mentions have been relatively increasing after cooling down from the announcement, with a significant increase in 2022 following M&A and collaboration announcements, sustainability actions, and controversies around its CEO, Jim Ratcliffe.

We also detected a geographical shift in mentions. Once dominant in the US, Ineos mentions dropped from 65% in 2015 to roughly 30% in 2022. Europe, on the other hand, has seen a spike from 25% to over 65%. Sentiment analysis offers another layer of insight.

While the sentiment has largely remained steady, there have been dips, especially during periods associated with fracking controversies and environmental incidents, including a toxic chemical spill. Digging deeper into Ineos’ ESG risks, there has been a decrease over the recent years; nonetheless, before 2019, we captured a relatively higher number of risks, mainly environmental–related controversies, coming from mentions about overexploitation of resources, namely fracking. Social-related risks display a significant proportion of data driven by social dialogue controversies as we capture multiple mentions of protests, particularly in 2017.

While Ineos ESG risks mentions represent 2.46% of its overall data share, its ESG initiatives mentions represent 5.91% of its web presence, signaling a more positive outlook for the firm, at least from a perception point of view. Furthermore, we detected that environmental–related initiatives are the main focus for Ineos, particularly climate change, while social initiatives arise, particularly in 2018, due to product safety mentions.

Data sources

To produce this analysis, we combined natural language processing with billions of textual web data related to the chemicals market. Using NLP-powered models gives us an edge as we can extract ESG, SDG, and financial insights that aren’t necessarily obvious or easy to detect. These insights help investors make better investment decisions. SESAMm leverages artificial intelligence and machine learning technologies to help you decipher and understand timely sentiment, trends, and ESG metrics on a wide range of public and private companies.

Reach out to SESAMm

TextReveal's web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or request a demo, contact one of our representatives.

Happy new year! 2018 already holds many exciting news with various projects and clients already onboard. We begin the year with 2 recently signed contracts with top-ranked hedge funds, additional features and cryptocurrencies added to L’Humeur des Marchés and published plentiful of internships and job opportunities. Moreover, following our partnership with Eagle Alpha and the event in New York last month, we will be organizing a roadshow in London to meet high-ranked hedge funds on February 7th and 8th.

Collaboration with new major clients

Recently, we have signed 2 major contracts with top-ranked hedge funds.

The first contract is with Nikko Global Wrap (one of the subsidiaries of Sumitomo Mitsui Asset Management, a major asset manager in Japan) managing JPY 1.7 trillion.

Second contract has been signed with La Française Investment Solutions, a subsidiary of La Française Group, a top 10 French asset manager with more than €64bn assets under management.

This great news proves our technology is trusted by major financial institutions and gives us more confidence to continue looking for collaboration opportunities worldwide.

Future contracts and new distributor

We are currently in negotiation talks with another major French asset manager, a bank, two insurers and a US hedge fund. We hope to keep up at the same pace for the whole year and sign new contracts in the weeks ahead.

Also, we have recently started a new partnership with Neudata, a major UK alternative data distributor. We have signed an agreement, so they could support us and promote our solutions & services.

After New York, London

Last month, SESAMm made its very 1st trip to the USA for the BIG Alternative Data Showcase week organized by our partner Eagle Alpha. It proved to be a valuable experience from which multiple business opportunities arose and we launched many product trials with significant US funds.

Next month, we are planning a roadshow in London with Eagle Alpha. We already arranged multiple meetings with hedge funds and, thanks to Eagle Alpha’s support, we are given a unique opportunity to present and show our solutions to asset managers and C-level decision makers.

New additions to L’Humeur des Marchés

Concerning our platform L’Humeur des Marchés, we are glad to announce that we will soon be providing historical data concerning the assets. This update is planned to happen during next month and will give users more flexibility and options related to their investment and strategies.

In addition, an alert module is under development and we have begun to include cryptocurrencies into the platform. Most of the top-ranked cryptocurrencies are currently covered – such as Bitcoin, Ethereum or Ripple, among others as shown below.

Developments are planned to further extend our coverage of alt-coins with the objective to include every single major capitalization into L’Humeur des Marchés.

New job opportunities

Last but not least, we will be scaling our team during 2018. Multiple internships and job offers are currently available to further support SESAMm’s growth and ambition. We are looking for candidates in the fields of IT, finance and Data science but, most of all, highly motivated individuals seeking challenges! You can find all our offers by following this link. We would be very excited to receive your applications or recommendations for profiles seeking to work with us!

Thank you for your support and best wishes to you for 2018!