Why ‘greenwashing’ is an issue for sustainable investments“”and how to avoid it

Why ‘greenwashing’ is an issue for sustainable investments“”and how to avoid it

If you're interested in sustainable investing, here are some things to keep in mind.

"It means a lot to people that their money is making an impact," says Wallace. "There are good funds out there that are good fits for people's portfolios."

But some funds really are more sustainable than others, says Karen Wallace, Morningstar's director of investor education. And she believes it's worth it for investors to put in effort to find investments that align with their values if that's important to them.

Rather than taking meaningful action against climate change, the financial industry is simply greenwashing investments, or making false claims about the sustainability of their products, to make money off of a popular trend, Fancy says.

Instead, it's called out as "marketing hype," as Tariq Fancy, the former chief investment officer for sustainable investing at BlackRock Inc., the world's largest asset manager, recently argued in an op-ed for USA Today.

But just how sustainable certain funds really are is a matter of debate. A major critique of investments that take environmental, social and governance practices of companies into account “” called ESG investing “” is that there is really no such thing as a truly sustainable investment.

Average investors want sustainable investment options.