Some Investors Stepping Up Due Diligence Regarding “Greenwashing” In Startups

Mimi Billing stated in an article this week at The Financial Times Online that, “Being seen to be green will benefit companies but a lack of scrutiny can encourage corporate greenwashing: bending the truth to appear environmentally friendly.

“One of the most prominent examples of greenwashing is Volkswagen’s emissions-cheating scandal in which it rigged ‘clean diesel’ vehicles with devices to cheat emissions tests. VW had to recall 8.5m cars in Europe and the scandal cost it an estimated €31.3bn in fines and settlements.”

The FT item noted that, “Yet greenwashing does exist in smaller companies, according to Hjalmar Stahlberg Nordegren, the founder of Karma, a Swedish start-up that works to reduce food waste. One reason is that the benefit of being seen to be green is big but the risk of being scrutinised is small.”

“Other sectors are receiving more scrutiny, and more investors are trying to hold such start-ups to account,” the FT article said.  “Prominent targets for such scrutiny include e-scooters, an industry that has expanded rapidly thanks to better technology, government subsidies and high demand for what has been seen as eco-friendly transport.”

Ms. Billing added that, “To separate the chaff from the wheat, some impact investors have stepped up their due diligence in start-ups.

“The venture capital arm of Norrsken manages the largest European fund to focus solely on investments in impact start-ups.

“It will invest only after it obtains expert analysis in the areas in which the start-up says it makes a difference.”

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