Fifty Shades of Green of Sustainable Investing
This article of the NRC gives a very clear analysis about how the sustainable investing market works. Due to lack of regulation, there is no standardised view on what exactly is a sustainable fund / index / share, so every bank kind of makes their own standard, saying that they are the best. There are several companies such as MSCI, or Sustainalytics, who make analysis of companies for these banks in the form of three categories, Environmental, Social and Governance, giving them a certain amount of points per category.
This is however, often based on the sustainability reports of companies themselves. Usually only the bigger companies have the capacity to do this, causing the bigger companies who may a more negative environmental impact, to have better sustainability scores than smaller companies. In this sense, ESG scoring is often only a paper reality, and does not really reflect the actual sustainability scoring of a company.
For example, Volkswagen in September 2015 was one of the industry leaders in ESG rating of RobecoSam when the diesel scandal came out.
Luckily EU regulations are on their way to create a Taxonomy of Sustainable Investing, with a list of criteria to which a sustainable investment must adhere to to be called 'green.'