Skip to Main Content
HBS Online
  • Courses
    Open Courses Mega Menu
    • Business Essentials
      • Credential of Readiness (CORe)
      • Business Analytics
      • Economics for Managers
      • Financial Accounting
    • Leadership & Management
      • Leadership Principles
      • Management Essentials
      • Negotiation Mastery
      • Organizational Leadership
      • Strategy Execution
      • Power and Influence for Positive Impact
      • Leadership, Ethics, and Corporate Accountability
    • Entrepreneurship & Innovation
      • Entrepreneurship Essentials
      • Disruptive Strategy
      • Negotiation Mastery
      • Design Thinking and Innovation
      • Launching Tech Ventures
    • Strategy
      • Strategy Execution
      • Business Strategy
      • Economics for Managers
      • Disruptive Strategy
      • Global Business
      • Sustainable Business Strategy
    • Finance & Accounting
      • Financial Accounting
      • Leading with Finance
      • Alternative Investments
      • Sustainable Investing
    • Business in Society
      • Sustainable Business Strategy
      • Global Business
      • Sustainable Investing
      • Power and Influence for Positive Impact
      • Leadership, Ethics, and Corporate Accountability
    • All Courses
  • For Organizations
    Open For Organizations Mega Menu
    • Corporate Learning
      Help your employees master essential business concepts, improve effectiveness, and expand leadership capabilities.
    • Academic Solutions
      Integrate HBS Online courses into your curriculum to support programs and create unique educational opportunities.
    • Need Help?
      • Frequently Asked Questions
      • Contact Us
    • Black, Latinx, and underrepresented minority professionals
      Pathways to Business

      Stories designed to inspire future business leaders.

  • Insights
    Open Insights Mega Menu
    • Business Insights Blog
      • Career Development
      • Communication
      • Decision-Making
      • Earning Your MBA
      • Entrepreneurship & Innovation
      • Finance
      • Leadership
      • Management
      • Negotiation
      • Strategy
    • All Topics
    • Sample Business Lessons and E-Books

      Gain new insights and knowledge from leading faculty and industry experts.

    • Free Guide

      Learn how to formulate a successful business strategy.

  • More Info
    Open More Info Mega Menu
    • Learning Experience
      Master real-world business skills with our immersive platform and engaged community.
    • Certificates, Credentials, & Credits
      Learn how completing courses can boost your resume and move your career forward.
    • Learning Tracks
      Take your career to the next level with this specialization.
    • Financing & Policies
      • Employer Reimbursement
      • Payment & Financial Aid
      • Policies
    • Connect
      • Student Stories
      • Community
    • Need Help?
      • Frequently Asked Questions
      • Request Information
      • Support Portal
    • Apply Now
Login
My Courses
Access your courses and engage with your peers
My Account
Manage your account, applications, and payments.
HBS Home
  • About HBS
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
HBS Online
  • Courses
  • Business Essentials
  • Leadership & Management
  • Entrepreneurship & Innovation
  • Strategy
  • Finance & Accounting
  • Business in Society
  • For Organizations
  • Insights
  • More Info
  • About
  • Support Portal
  • Media Coverage
  • Founding Donors
  • Leadership Team
  • Careers
  • My Courses
  • My Account
  • Apply Now
  • …→
  • Harvard Business School→
  • HBS Online→
  • Business Insights→

Business Insights

Harvard Business School Online's Business Insights Blog provides the career insights you need to achieve your goals and gain confidence in your business skills.

 
Filter Results Arrow Down Arrow Up

Topics

Topics

  • Accounting
  • Analytics
  • Business Essentials
  • Business in Society
  • Career Development
  • Communication
  • Community
  • ConneXt
  • Decision-Making
  • Earning Your MBA
  • Entrepreneurship & Innovation
  • Finance
  • Leadership
  • Management
  • Marketing
  • Negotiation
  • News & Events
  • Productivity
  • Staff Spotlight
  • Strategy
  • Student Profiles
  • Technology
  • Work-Life Balance

Courses

Courses

  • Alternative Investments
  • Business Analytics
  • Business Strategy
  • CORe
  • Design Thinking and Innovation
  • Disruptive Strategy
  • Economics for Managers
  • Entrepreneurship Essentials
  • Financial Accounting
  • Global Business
  • Launching Tech Ventures
  • Leadership Principles
  • Leadership, Ethics, and Corporate Accountability
  • Leading with Finance
  • Management Essentials
  • Negotiation Mastery
  • Organizational Leadership
  • Power and Influence for Positive Impact
  • Strategy Execution
  • Sustainable Business Strategy
  • Sustainable Investing
Subscribe to the Blog
*
Please complete this required field.
Email must be formatted correctly.
Please complete all required fields.
RSS feed

Filters

Topics

Topics

  • Accounting
  • Analytics
  • Business Essentials
  • Business in Society
  • Career Development
  • Communication
  • Community
  • ConneXt
  • Decision-Making
  • Earning Your MBA
  • Entrepreneurship & Innovation
  • Finance
  • Leadership
  • Management
  • Marketing
  • Negotiation
  • News & Events
  • Productivity
  • Staff Spotlight
  • Strategy
  • Student Profiles
  • Technology
  • Work-Life Balance

Courses

Courses

  • Alternative Investments
  • Business Analytics
  • Business Strategy
  • CORe
  • Design Thinking and Innovation
  • Disruptive Strategy
  • Economics for Managers
  • Entrepreneurship Essentials
  • Financial Accounting
  • Global Business
  • Launching Tech Ventures
  • Leadership Principles
  • Leadership, Ethics, and Corporate Accountability
  • Leading with Finance
  • Management Essentials
  • Negotiation Mastery
  • Organizational Leadership
  • Power and Influence for Positive Impact
  • Strategy Execution
  • Sustainable Business Strategy
  • Sustainable Investing
Subscribe to the Blog
*
Please complete this required field.
Email must be formatted correctly.
Please complete all required fields.
RSS feed

Impact Washing: What It Is & How to Stop It

Professionals discussing impact washing
  • 04 Aug 2022
Catherine Cote Author Staff
tag
  • Business in Society
  • Sustainable Investing

As climate change, environmental degradation, and social issues intensify, sustainable investing has emerged as a way to make a positive difference.

Sustainable investing is the practice of making investment decisions that not only provide financial returns but long-term environmental or social value—and it’s rapidly garnering attention.

According to the online course Sustainable Investing, over 25 percent of global assets in 2021 were allocated in accordance with an environmental, social, or governance (ESG) mandate, labeling them as “sustainable” or “green” investments.

Yet, the swift rise in sustainable investments’ popularity has led to a deceptive phenomenon called impact washing. Here’s a primer on what impact washing is, why it happens, and how to identify and combat it.


Free E-Book: How to Be a Purpose-Driven, Global Business Professional

Access your free e-book today.

DOWNLOAD NOW

What Is Impact Washing?

Impact washing is when fund managers or bond issuers overstate or falsely claim an investment’s positive impact on the environment or society. This can be a purposefully dishonest claim, an embellishment of the truth, or a mistake due to inadequate impact measurement.

Greenwashing vs. Impact Washing

Before diving deeper into impact washing, you must separate it from the closely related term greenwashing.

Greenwashing is when a company claims business practices or products are sustainable when they aren’t. This is often done to garner positive attention and attract socially and environmentally conscious customers. However, it can backfire: Modern consumers often spot and call out instances of greenwashing, resulting in negative press and loss of customer loyalty.

Impact washing is similar to greenwashing but specific to the investment world. It’s done to draw socially and environmentally minded people to specific investment decisions. Impact washing can be harder to identify than greenwashing, so it continues to be a real problem in the investment space.

Why Does Impact Washing Happen?

Although unethical, impact washing isn’t illegal. This is because there aren’t any public standards or laws currently governing sustainable investments. There are private governance measures in place, but they aren’t required for something to be labeled as a sustainable or green investment.

Some firms take advantage of this lack of legal governance to exploit the growing trend, labeling stocks, bonds, or other assets as sustainable or green without ensuring they’ll be used for such purposes.

Further incentivizing impact washing is the number of individuals willing to invest more money into sustainable investments than unsustainable ones. Because of this, some firms increase their assets under management by immorally stretching the truth.

Impact washing can also happen accidentally if firms don’t accurately measure their investments’ impact—or at all. Labeling an asset as sustainable or green without tracking whether it makes a positive impact in the way that was promised is still a form of impact washing. This usually doesn’t happen out of malintent and can be fixed by implementing internal procedures and best practices.

Sustainable Investing | Explore the intersection of investment and impact | Learn More

How to Identify and Stop Impact Washing

If You’re an Investment Professional

If you’re an investment professional who manages portfolios or issues bonds, you’re likely already aware of your firm’s approach to sustainable investing. If you’re just breaking into the field, Professor Caroline Flammer, who’s featured in Sustainable Investing, recommends this basic structure for certifying sustainable investments:

  1. At the time of issuance, certify the asset is committed to financing environmentally or socially beneficial projects.
  2. After the funds have been invested, verify they were used for the intended purpose and report on their impact.

If your firm doesn’t already abide by a set of sustainability standards, consider proposing one. For example, many firms base their criteria around the United Nations’ 17 Sustainable Development Goals, which include lofty objectives, such as ending poverty worldwide, taking urgent action to combat climate change, and achieving gender equality. An asset’s proposed contributions toward one or more of those goals can be foundational for categorizing it as a sustainable investment.

Additionally, measuring and managing sustainable investments’ impact is key. If your firm isn’t already using clear, rigorous methods to measure and manage their impact, consider proposing some.

In Sustainable Investing, Harvard Business School professors Shawn Cole and Vikram Gandhi recommend using the Nine Impact Principles developed by the International Financial Corporation as a guide. These principles were developed to inform decision-making regarding sustainable investments:

  1. Define strategic objectives consistent with the investment strategy.
  2. Manage strategic impact on a portfolio basis.
  3. Establish the manager’s contribution to the impact’s achievement.
  4. Assess each investment’s expected impact using a systematic approach.
  5. Assess, address, monitor, and manage each investment’s potential negative impacts.
  6. Monitor each investment’s progress toward achieving impact against expectations and respond appropriately.
  7. Execute exit strategies that consider the effect on sustained impact.
  8. Review, document, and improve decisions and processes based on the impact’s achievement and lessons learned.
  9. Publicly disclose alignment with the Nine Impact Principles and provide regular, independent verification of the alignment.

There isn’t currently one way to measure and manage the impact of sustainable investments, so it’s up to private firms and professionals like you to lead with integrity and hold each other accountable to effect change while delivering returns.

If You’re an Individual Investor

If you’re an individual investor who’s searching for true sustainable investment options, learn more about the firm you’re working with. You can ask questions like:

  • How does the firm determine whether to label an investment as sustainable?
  • What standards or principles do you use to make those decisions?
  • How do you measure the investment’s impact? Will I be notified of its impact after the fact?

Because there’s no public governance of sustainable investments, the answers to these questions can vary greatly between firms. As an individual investor, you can explore your options. If a firm doesn’t have a clear measurement system in place or can’t articulate its criteria for labeling an investment as sustainable, it may be impact washing. In that case, you’d be better off investing elsewhere.

Which HBS Online Business in Society Course is Right for You? | Download Your Free Flowchart

Holding Firms and Companies Accountable

Until public governance of sustainable investments is in place, it’s up to investment professionals and individual investors to thwart impact washing. You can do this by ensuring your firm and colleagues adhere to private standards and by holding other companies accountable to use funds for sustainable projects.

Taking an online course, like Sustainable Investing, can be an effective way to gain the skills to identify sustainable investment opportunities, responsibly manage portfolios, and avoid impact washing.

Are you interested in learning how to make positive, long-term environmental and social change while providing strong financial returns? Explore Sustainable Investing, one of our online business in society courses.

About the Author

Catherine Cote is a marketing coordinator at Harvard Business School Online. Prior to joining HBS Online, she worked at an early-stage SaaS startup where she found her passion for writing content, and at a digital consulting agency, where she specialized in SEO. Catherine holds a B.A. from Holy Cross, where she studied psychology, education, and Mandarin Chinese. When not at work, you can find her hiking, performing or watching theatre, or hunting for the best burger in Boston.
 
All FAQs

Top FAQs

How are HBS Online courses delivered?

+–

We offer self-paced programs (with weekly deadlines) on the HBS Online course platform.

Our platform features short, highly produced videos of HBS faculty and guest business experts, interactive graphs and exercises, cold calls to keep you engaged, and opportunities to contribute to a vibrant online community.

Are HBS Online programs available in languages other than English?

+–

We expect to offer our courses in additional languages in the future but, at this time, HBS Online can only be provided in English.

All course content is delivered in written English. Closed captioning in English is available for all videos. There are no live interactions during the course that requires the learner to speak English. Written English proficiency should suffice.

Do I need to come to campus to participate in HBS Online programs?

+–

No, all of our programs are 100 percent online, and available to participants regardless of their location.

How do I enroll in a course?

+–

All programs require the completion of a brief application. The applications vary slightly from program to program, but all ask for some personal background information. You can apply for and enroll in programs here. If you are new to HBS Online, you will be required to set up an account before starting an application for the program of your choice.

Our easy online application is free, and no special documentation is required. All applicants must be at least 18 years of age, proficient in English, and committed to learning and engaging with fellow participants throughout the program.

After submitting your application, you should receive an email confirmation from HBS Online. If you do not receive this email, please check your junk email folders and double-check your account to make sure the application was successfully submitted.

Updates to your application and enrollment status will be shown on your Dashboard. We confirm enrollment eligibility within one week of your application.

Does Harvard Business School Online offer an online MBA?

+–

No, Harvard Business School Online offers business certificate programs.

What are my payment options?

+–

We accept payments via credit card, wire transfer, Western Union, and (when available) bank loan. Some candidates may qualify for scholarships or financial aid, which will be credited against the Program Fee once eligibility is determined. Please refer to the Payment & Financial Aid page for further information.

We also allow you to split your payment across 2 separate credit card transactions or send a payment link email to another person on your behalf. If splitting your payment into 2 transactions, a minimum payment of $350 is required for the first transaction.

In all cases, net Program Fees must be paid in full (in US Dollars) to complete registration.

What are the policies for refunds and deferrals?

+–

After enrolling in a program, you may request a withdrawal with refund (minus a $100 nonrefundable enrollment fee) up until 24 hours after the start of your program. Please review the Program Policies page for more details on refunds and deferrals. If your employer has contracted with HBS Online for participation in a program, or if you elect to enroll in the undergraduate credit option of the Credential of Readiness (CORe) program, note that policies for these options may differ.

 

Sign up for News & Announcements


  • • Please complete this required field.
  • • Email must be formatted correctly.
  • • Please complete all required fields.

Subject Areas

  • Business Essentials
  • Leadership & Management
  • Entrepreneurship & Innovation
  • Strategy
  • Finance & Accounting
  • Business & Society

Quick Links

  • FAQs
  • Contact Us
  • Request Info
  • Apply Now
  • Support Portal

About

  • About Us
  • Media Coverage
  • Founding Donors
  • Leadership Team
  • Careers @ HBS Online

Legal

  • Legal
  • Policies
Harvard Business School
Copyright © President & Fellows of Harvard College
  • Site Map
  • Trademark Notice
  • Digital Accessibility