Greenwashing is Unethical and Illegal

Turkish Investor Relations Society President Aslı Selçuk, who said that sustainability performance is taken into consideration as well as financial performance when making the investment decision, underlines that greenwashing is unethical and illegal because it is gaining an unfair competitive advantage by making false promises.

Ms. Aslı Selçuk, Chairperson of the Turkish Investor Relations Society, draws attention to the fact that investors prefer stakeholder-oriented companies that have sustainable business models that can withstand market shocks, that can act with innovative perspectives in the face of uncertainty and risk and that they consider targets and performances in financial and sustainability issues in their investment decisions.

How did the changes in the business world transform in terms of investor relations during the pandemic? How do you evaluate the changes in the investment world during this period?

In recent years, global, sectoral and regional dynamics have changed rapidly. Economic and political developments, legislation and regulations, stakeholder dynamics, and investor expectations create an ever-changing operating environment for companies. The list goes on when you add sustainability, technology, digitalization, and artificial intelligence. The onset of the pandemic has brought along countless uncertainties. In this process, we have seen how interconnected and fragile the system is on a global basis, and that the traditional methods failed to cope with the problems encountered.

The pandemic passed with much more intense work, far from the travels we, investor relations professionals, are accustomed to. For investors, the importance of open and continuous communication increases especially in times of uncertainty. We kept in constant communication by using all channels proactively. During this period, investors focused on issues such as governance, risk management, risks and opportunities related to the climate crisis, cyber security, supply chain security, employee and community health and safety, diversity, equality and inclusion. It was questioned how companies created social benefits within the scope of the pandemic, apart from their main business lines.

With the importance given to sustainability and the increasing financing needs of companies, new capital market products emerged, while the size of responsible investments exceeded 30 trillion dollars. This figure represents one-third of professionally managed assets in the world.

Can you talk about the role of investor relations in the market?

In investor relations, we make a detailed analysis from the past to the future, from macro to micro, and deliver the main investment messages to the right investor audience by using an effective communication strategy. Our aim is to persuade them to invest, expand and diversify our investor base, and thus to ensure that our capital market instruments reach their fair value. Transparent, continuous and consistent communication is critical for both access to capital and reputation management in the markets. We talk about not only our companies but also our country at the meetings and thus, we represent our country in global markets.

Today, it is possible to say that not only publicly traded companies but also all institutions that want to access finance need investor relations. Borsa Istanbul and the Central Bank have “Investor Relations” units as well. We are a two-way communication bridge between our institutions and the market. While we tell our investment story in the market, we also tell our managements about global best practices, developments and investor expectations. Thus, we create added value for our companies and our country.

We see that the sustainability performance of companies is also effective in the investment preferences of investors. How should companies transform themselves in this area?

Investors prefer stakeholder-oriented companies that have sustainable business models that can withstand market shocks and that can act with innovative perspectives in the fight against uncertainty and risk. Profitability and sustainability stand out as two elements that feed each other. While making an investment decision, the target and performance in financial and sustainability issues are taken into consideration.

Europe, the largest trade partner of our country, brings many mandatory regulations with the “Green Deal”. In order to avoid additional costs and remain competitive, our companies need to maintain their activities in accordance with the standards determined in this context. We see that regulatory institutions are taking action on sustainability issues, working for a common reporting system, and there is a shift from qualitative to quantitive and voluntary to compulsory. The investor wants reliable, consistent, measurable and comparable data.

Companies are working on how to manage the risks and opportunities they foresee within the scope of climate change, set measurable long term goals and report their performance. It is very important for the reputation of the company that this process is managed correctly, that the issue is embraced at the level of the Board of Directors, that the announced results are transparent and reliable and that the management is accountable. Otherwise, it may result in loss of confidence, financial risk and legal action.

Recently, the concept of greenwashing has emerged with transformation of the sustainability into a marketing strategy. How can investors distinguish greenwashing companies?

This is a hotly debated topic right now. First of all, companies are expected to be honest, transparent and accountable. Greenwashing is gaining an unfair competitive advantage by making false promises and is both unethical and illegal. The most important factors are that companies are consistent and transparent, handle sustainability at the Board, and integrate it into all strategic decisions and processes of the company.

As Turkish Investor Relations Society on which subjects do you provide support to companies?

We established Turkish Investor Relations Society in 2009 with our belief in the importance and potential of the “investor relations” profession. Turkish Investor Relations Society with its 80 corporate members, represents 75% of the market cap of Borsa İstanbul. We are the representative and reference center of the investor relations profession in our country, with our collaborations, publications and working groups, as well as the numerous trainings, seminars and meetings we have organized since our establishment. We are constantly working in cooperation with our regulatory bodies and stakeholders in order to raise the investor relations practices in our country to global standards and spread them across the board. As Turkish Investor Relations Society Board of Directors, sustainability is among our strategic priorities. Investors now integrate the sustainability performance of companies into their investment decisions, as well as financial and operational indicators. As the representative of the investor relations profession in our country, we work with the aim of increasing the awareness of our companies on sustainability issues and reaching global standards in implementation and reporting.