Crosswashing: When Green Narratives Hide Climate Risks

“Crosswashing leverages real but limited sustainability initiatives to overshadow companies’ broader environmental impacts.”

Regulatory Pressure and the Cost of Omission

As crosswashing spreads, regulators are responding. The UK Advertising Standards Authority’s 2022 decision to ban HSBC’s “sustainable” advertisements, which failed to mention its continued fossil fuel financing, is one of many actions pushing toward more truthful climate communication. Similarly, the SEC’s proposed climate disclosure rule in the U.S. aims to mandate transparent reporting of material climate-related risks, including emissions and governance oversight.

Beyond regulation, asset owners are tightening their policies. Large institutional investors and climate alliances like NZAM (Net Zero Asset Managers) are beginning to scrutinize portfolio companies’ actual progress toward decarbonization, not just their marketing claims. This has sharpened focus on emissions accounting, capital alignment, and policy engagement, key tools to spot and counter crosswashing.

For more context on how public policy and finance intersect with climate disclosures, see FFI’s commentary on COP27 and the future of transparency.

Real-World Examples

JBS S.A. pledged net-zero emissions by 2040, but independent estimates suggest its emissions rose over 50% in five years, a footprint larger than many countries. Meanwhile, its supply chain is linked to Amazon deforestation. Though JBS promotes reforestation and methane-reduction efforts, it omits up to 97% of emissions from its disclosures, most of which stem from livestock farming, a carbon-intensive process dependent on fossil fuel–based agriculture systems.

Delta Air Lines advertised itself as “carbon-neutral” in 2020, relying on carbon offsets rather than emissions cuts. Many of those offsets were later revealed to be ineffective. This allowed Delta to appear green without confronting its core emissions from jet fuel. Offsets became a substitute for structural change, a pattern common in aviation and other fossil-fuel-dependent sectors.

Amazon showcases ambitious climate initiatives, including its Climate Pledge and heavy investment in renewable energy. Yet its emissions grew by 40% since its pledge, and it has excluded ~99% of product-related Scope 3 emissions from reporting. Amazon’s opposition to state climate regulation, such as Oregon’s 2023 emissions bill targeting data centers, further contradicts its climate rhetoric.

These examples illustrate how real but narrow sustainability efforts can be magnified to overshadow ongoing environmental harms, especially when those harms are deeply tied to fossil fuel consumption, production, or financing.

The Fossil Fuel Thread

Whether a company drills, ships, finances, or merely depends on fossil fuels, crosswashing becomes a tempting tool to divert attention. Financial institutions fund green initiatives while underwriting coal projects. Tech firms run sustainability ads while expanding data centers powered by natural gas. Consumer goods companies highlight eco-friendly packaging but rely on petrochemical-intensive global supply chains.

This is not accidental. Many firms recognize that ESG credentials boost stock performance, improve stakeholder relationships, and attract top talent. Yet if fossil fuel dependencies are not phased out, or worse, are strategically hidden, investors will misprice risk, and climate goals will be set back.

As FFI Solutions highlights in The Fallacy of Shareholder Capitalism, corporate sustainability must be judged by impact, not image. The public endorsement of ESG principles means little if companies simultaneously lobby against climate regulation or scale up fossil-based operations.

Investor Implications and What to Do About It

For asset managers and long-term investors, crosswashing creates three major risks:

1. Portfolio Risk Mispricing
    If climate liabilities are underreported, asset prices may not reflect true risk exposure. This can result in surprise write-downs, reputational damage, or long-term underperformance, particularly as the global economy accelerates decarbonization.
2. Engagement Effectiveness
    Shareholder proposals on climate risk often fail to pass or are weakened by companies’ existing “green” commitments. When firms appear progressive but omit material exposures, investor pressure loses urgency and credibility.
3. Reputational Spillover
    Investment in crosswashing companies can backfire. When contradictions are revealed, funds may face criticism for enabling climate obfuscation, particularly those claiming ESG alignment.

Three Key Actions for Investors

1. Demand Comprehensive Disclosures
   Push for full reporting of Scope 1, 2, and 3 emissions, capital expenditure breakdowns, and climate scenario analysis. Insist that companies apply consistent, standardized frameworks such as TCFD or ISSB, and don’t allow cherry-picked data points to dominate reports.
2. Verify Alignment Between Words and Capital
   Review whether climate pledges are reflected in resource allocation. If fossil fuels still dominate a company’s operations and budget, even a splashy new wind project cannot mask the underlying risk.
3. Engage More Strategically
   Use voting rights and stewardship platforms to pressure firms not only to disclose, but to transition. Target lobbying activities, executive compensation structures, and board accountability mechanisms. If necessary, escalate engagement through coalitions or public advocacy.

For guidance, see FFI’s ongoing work on climate stewardship frameworks that prioritize action over optics.

Policy Levers to Watch

The solution to crosswashing isn’t only investor vigilance, it’s also regulatory integrity. Securities regulators and accounting standard-setters can curtail the practice by:

• Requiring companies to disclose material climate risks, regardless of whether they paint the company in a positive light.
• Establishing thresholds and standards for terms like “carbon neutral,” “net-zero,” or “sustainable.”
• Penalizing firms that misrepresent or omit climate-related information in investor communications.

Ultimately, climate disclosure regulation must evolve beyond form to substance, so that omissions and inconsistencies are treated as misleading conduct, not just marketing spin.

Toward Truthful Sustainability

Crosswashing poses a systemic challenge to effective climate finance and corporate accountability. In a world increasingly shaped by climate disruption, capital must be able to distinguish between real leadership and selective storytelling. Companies that engage in crosswashing may win short-term accolades, but over time they face growing scrutiny from regulators, investors, and society at large.

As fossil fuel risks grow, from stranded assets to carbon taxes to legal action, firms that obscure their true impact not only mislead stakeholders, but also leave themselves unprepared for the road ahead. Transparent, consistent, and comprehensive climate disclosures are essential to identifying and rewarding companies genuinely working toward transition.

At FFI Solutions, we help clients separate signal from noise in sustainability data. Learn more about our tools for analyzing emissions disclosures, evaluating climate governance, and mitigating crosswashing risks.

In the era of climate reckoning, substance must replace spin. It’s time to hold companies to account, not just for what they promise, but for what they do.