The Greenwashing Files · Part 2 of 3
Most investors who care about impact have already done the obvious things — picked funds with 'sustainable' in the name, steered clear of the worst offenders, maybe swapped into a green ETF. It feels like the right call. And for a long time, you had no easy way to check whether it actually was.
That's changed. The data now exists to look at what your portfolio actually does to the world — not what the fund name implies, not what the sustainability report claims, but what the companies you own are measurably doing. The hard part isn't accessing that information anymore. It's knowing what to look for.
This is a practical guide to doing exactly that.
Case Study
ESGU — the iShares MSCI USA ESG Optimized ETF — is one of the most widely held sustainable funds in the world. It’s also a useful illustration of how greenwashing can be structural rather than intentional.
The fund’s primary goal isn’t to make the world better. It’s to mimic the financial returns of the standard market while applying a light sustainability filter. Because it operates under a strict tracking error budget, it mathematically cannot deviate too far from the S&P 500 or MSCI USA indexes. That financial constraint forces it to maintain what its methodology calls ‘sector neutrality’ — meaning it deliberately keeps baseline exposure to industries like traditional oil and gas.
Rather than divesting from fossil fuels or companies engaging in excessive lobbying, ESGU uses a ‘best-in-class’ approach: it overweights the slightly less harmful operators within dirty sectors. The result is that corporate giants like ExxonMobil and Chevron routinely remain among its holdings — a fact that would surprise most investors who chose it for its green credentials.
The fund’s sustainable-looking profile is largely driven by its heavy weighting in large technology companies — Microsoft, Apple, Nvidia — which naturally have low direct emissions. That’s not the same as impact. Meanwhile, critical considerations like plastic pollution, deforestation, and political lobbying are treated as financial risks to manage rather than moral red lines.
ESGU does not work for a sustainable investing objective. It’s a risk-management tool that applies a cosmetic layer to the existing corporate status quo. For an investor who wants to genuinely back companies building a better future, it doesn’t do that job.
This isn’t an argument to sell ESGU. It’s an argument to know what you own — and to use data rather than labels to make that call.
Greenwashing rarely announces itself. It hides in reassuring language, in data you can't verify, and in methodologies designed to be trusted rather than examined. The investors who see through it most consistently aren't necessarily the most sophisticated — they're the ones who ask the right questions before they look at a single score.
These four questions cut through most of it.
Question 1
Most investors who care about impact have already made choices they believe reflect their values. The question is whether the data backs that up. Good intentions expressed through fund labels aren't the same as verified alignment.
This is the reframe the whole exercise demands: it's not about whether you tried to invest responsibly. It's about whether your portfolio actually is — holding by holding, dollar by dollar.
Question 2
This is the ESG trap. Most sustainability data measures how well a company manages ESG risks to its own financial performance — not what it does to the world. A fossil fuel producer can score well by managing its reputational exposure skillfully. An arms manufacturer can score well on governance.
Before trusting any score or rating, ask the question it was built to answer. Is it measuring what you think it's measuring — or something else entirely?
Question 3
A fund label is a conclusion. An ESG rating is a conclusion. A sustainability report is a curated conclusion. None of them show you the workings.
The test is whether you can actually see the underlying data — emissions trajectories, labor practices, lobbying behavior, pay ratios — or whether you're being handed a summary and asked to accept it. Genuine transparency means the evidence is visible. Everything else is a stronger-looking label.
Question 4
Much sustainability data is self-reported. Companies submit their own figures to rating agencies, write their own sustainability reports, and choose what to disclose — and what not to. The question of independence is the one most investors never think to ask.
It's also the one that most directly separates genuine transparency from sophisticated greenwashing. Data from a source with no financial interest in the outcome — independently verified, openly documented — is a fundamentally different thing from a company's own account of itself.
Once you've asked the right questions, the next challenge is practical: where do you actually go to get answers? For most investors, that's where the journey has historically stalled. The data exists — but accessing it, interpreting it, and applying it to your own portfolio has never been straightforward.
The conventional options don't go far enough. A brokerage account shows you prices and performance. A fund's sustainability report shows you what the fund wants you to know. An ESG rating gives you a risk measure with no visible workings. None of them answer the four questions above with any real depth.
To show what a more transparent approach looks like in practice, here's how Ziggma structures the information — not as a pitch, but as an example of what genuine portfolio-level impact data can look like when it's built for the investor rather than the fund manager.
Layer 1
The first number you see is your portfolio's aggregate Impact Score — a single figure, weighted by allocation, that consolidates every holding into one view. A score of 54 marked "Mixed," for example, tells you immediately that your portfolio is doing some things well and some things not so well.
It's a starting point, not a verdict. Its job is to prompt the next question: where exactly is the mix?
Layer 2
Underneath the headline score, every holding is assessed across four dimensions — visible both at the individual stock level and rolled up across your whole portfolio:
This is where contradictions surface. A holding might score well on Climate Action while showing red on Accountability. A fund that looks clean at the portfolio level might be dragging your Fair Labor score down significantly. The sub-scores make those gaps visible — which is exactly what greenwashing depends on you not seeing.
Layer 3
Beyond the four core dimensions, investors can customise their view to surface the specific metrics that matter most to them. The available data points include:
Link your brokerage account or add your holdings manually. From the moment your portfolio is connected, Ziggma shows you an aggregate Impact Score and Climate Score — a single number that reflects your exposure across every position. This is your baseline. Most investors are surprised by what they see.
Navigate to the Impact tab in your portfolio view. You’ll see your aggregate Climate Score, Impact Score, and Controversy Score alongside a breakdown of which holdings are contributing positively and which are dragging the picture down. This is the view that answers the question most investors have never been able to ask: what does my portfolio actually do to the world?
Click any holding to see its individual scores across all five Impact dimensions — Climate Action, Resource Use, Fair Labor, Accountability, and overall Impact. The Controversy Score sits alongside these, updated daily. This is where you start to see which companies are genuinely well-run on impact and which ones are coasting on a strong brand.
Sort by Impact Score and Controversy Score to find the weakest links. Pay particular attention to the combination of a low Impact Score and recent controversy flags — that profile is the one most consistent with greenwashing: a company that markets itself as responsible while its behavior tells a different story.
You don't need to read every sustainability report. These patterns show up consistently in holdings that don't hold up to scrutiny
Rising emissions, impressive pledges
Net-zero commitments mean little if actual Scope 1 and Scope 2 emissions are trending upward. The Climate Score is built on trajectory as well as targets — not just promises.
Strong sustainability brand, weak Impact Score
If a company is prominent in sustainable funds but scores poorly on real-world impact dimensions like Fair Labor or Resource Use, that gap is a signal. The Impact Score sees what the brand doesn’t say.
High climate score, low Accountability score
A company can be doing well on emissions while spending heavily lobbying against environmental policy. The Accountability dimension — covering lobbying, privacy, and peace and justice — catches exactly this kind of contradiction.
Controversy flags alongside sustainability marketing
Accumulating regulatory actions, NGO investigations, or supply chain scandals while aggressively promoting sustainability credentials is a classic greenwashing signature. The Controversy Score tracks it daily.
A fund label with no traceable methodology
If you own a ‘sustainable’ fund and can’t find a clear explanation of what it holds and why — with verifiable criteria rather than vague principles — treat the label as marketing.
The most reliable way is to look at verified, third-party impact data rather than fund labels or company marketing. Connect your portfolio in Ziggma and navigate to the Impact tab. Your aggregate Climate Score, Impact Score, and Controversy Score will show you how your holdings actually perform against independent criteria — not self-reported claims.
The Climate Score measures a company’s track record on reducing greenhouse gas emissions — Scope 1 and Scope 2 — as well as its net zero targets where they exist. It’s based on verified data, not press releases or carbon offset accounting. A higher score reflects a demonstrably better record on real emissions reduction. For a broader view of how a portfolio’s emissions exposure is measured, see Ziggma’s guide to the climate impact of investments.
An ESG score measures how well a company manages environmental, social, and governance risks to its own financial performance. An Impact Score measures what the company actually does to the world. The two can diverge significantly — a company can score well on ESG while performing poorly on real-world impact. Ziggma uses an Impact Score, not an ESG score, because the distinction matters.
The Accountability dimension within the Impact Score covers a company’s behavior on lobbying and political contributions, privacy and data management, and peace and justice. It captures the kind of behavior that often flies under the radar — a company can be a climate leader in its marketing while simultaneously lobbying against climate legislation.
The Controversy Score monitors real-world incidents involving a company — regulatory actions, legal disputes, NGO investigations, and supply chain scandals. It updates daily, which means it reflects what’s actually happening now rather than what was true when last year’s sustainability report was published. You can explore how this works across your holdings via Ziggma’s free portfolio tracker.
Not at all. The scores give you information, not instructions. You can use the stock and ETF screener to rotate to better alternatives, monitor a holding as it evolves, or simply make a more informed decision the next time you rebalance. Ziggma is built to help you understand what you own — what you do with that understanding is entirely your call.
Once you’ve identified a weak holding using Ziggma’s Impact and Climate Scores, the stock screener lets you filter for companies in the same sector with stronger scores. Staying invested in a sector while rotating to its best impact performers is often more effective than blanket divestment — and tends to hold up well on returns. You can also explore curated lists like Ziggma’s best climate stocks as a starting point. For investors who want to go further, Invest4Change's guide to determining your impact investor type is a useful framework for deciding how far to take your values alignment.
Auditing is part one. Part two is building a portfolio that holds up to the same scrutiny. Ziggma’s guide to building a greenwashing-free portfolio walks through how to construct a portfolio around verified impact data rather than labels — including how to use the Portfolio Optimizer to improve both quality and impact at the same time. Investors looking to go fossil-free can also explore Ziggma’s fossil-free portfolio guide.
You don't need to read every sustainability report. These patterns show up consistently in holdings that don't hold up to scrutiny
Ziggma’s stock and ETF screener lets you filter by Impact Score, Climate Score, sector, financial quality, yield, and more — so you can find holdings that align with your values without compromising on the investment case. Returns and responsibility don’t have to pull in opposite directions.
The Portfolio Checkup gives you a comprehensive breakdown of your holdings — surfacing where you stand on impact, quality, risk, and yield in one view. It’s the fastest way to see the full picture before deciding what to change.
The Portfolio Optimizer goes a step further — it simultaneously optimises your portfolio across impact, quality, risk, and yield to find the best combination across all four. A smarter way to build a portfolio you can actually stand behind.
Companies improve, regress, and get caught. Impact Scores update daily so your view of a holding stays current — not frozen at last year’s sustainability report.
← Part 1
What greenwashing really looks like in 2026
Part 3 →
Coming soonHow to build a truly greenwashing-free portfolio
Next: Part 3 of 3
Part 3 is about transparency — what it actually means to see through the data, where Ziggma's scores come from, and how to build a portfolio you can genuinely stand behind.
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