In a world where sustainable investing has become increasingly prominent, the reality of impact investing often falls short of expectations. Many companies claim to have made significant strides toward environmental and social responsibility, but in truth, much of this can be attributed to a phenomenon known as “greenwashing.” Greenwashing occurs when companies exaggerate or falsely represent their sustainability efforts, leaving investors questioning the true impact of their portfolios. In a recent episode, Roman Cassini, Head of ESG at Hosking Partners, shared his invaluable insights on how to navigate these challenges and approach investing with a more long-term mindset.

Roman Cassini’s background is anything but conventional. Having started his career as an officer in the British Army, he then transitioned to a strategic role in the UK Ministry of Defence before moving into finance, where he now leads the ESG efforts at Hosking Partners. His unconventional path offers a unique perspective on the intricacies of impact investing, especially in relation to tackling greenwashing and promoting active ownership.

 

The Rise of Greenwashing in Sustainable Investing

Greenwashing has become a significant concern as more investors are seeking to make a positive difference through their investments. Companies eager to capitalise on this growing demand often overstate their sustainability credentials to attract environmentally conscious investors. However, as Roman highlighted during the conversation, this trend undermines the real goals of ESG (Environmental, Social, and Governance) investing.

“Greenwashing is a major issue. Investors want to make an impact, but the real challenge is in accurately measuring that impact. Many companies make bold claims, but they often fall short of delivering meaningful results,”

Roman noted.

The crux of the problem, as Roman explained, lies in the difficulty of quantifying the real-world impact of investments. While financial professionals are adept at building models to measure profitability, calculating the long-term environmental or social impact of a company’s activities is far more complex. ESG issues, such as climate change, deforestation, and human rights violations, are not easily translated into figures or metrics that can fit neatly into financial models.

“There’s a fundamental issue with measurement in the sector,” Roman stated. “Investors want to quantify the impact, but the reality is far more complicated. We often deal with long-term goals, like net-zero targets, that don’t have immediate, measurable outcomes. Yet, the pressure to show progress leads to companies overstating their sustainability credentials.”

 

The Long-Term Approach to ESG Investing

Roman strongly advocates for a long-term approach to ESG investing, one that prioritises meaningful impact over short-term gains. At Hosking Partners, where the focus is on holding stocks for an average of five to ten years, this long-term thinking is embedded into their investment strategy. Unlike many investment firms that prioritise quick returns, Hosking Partners takes a broader, more patient view of the market, seeking to invest in companies that align with sustainable practices over the long haul.

“We need to look beyond the immediate gains and think about the broader picture. Climate change and energy transitions are long-term challenges, and our investment strategies need to reflect that,” Roman said.

This perspective is crucial when dealing with issues such as climate change, which require sustained efforts over decades. While some investors may shy away from long-term strategies due to uncertainty and volatility in the market, Roman emphasised the importance of sticking to a principled approach.

“Short-termism often drives poor decisions. When investors focus only on quarterly earnings or short-term stock price movements, they risk ignoring the bigger picture. In contrast, a long-term perspective allows us to see through the noise and identify the companies that will succeed in the future,”

he explained.

 

Active Ownership: A Tool for Positive Change

One of the most effective ways for investors to ensure that their money is driving real-world impact is through active ownership. This involves engaging with the companies they invest in, not just to earn returns but to influence their behaviour and ensure they are adhering to ethical and sustainable practices. As Roman pointed out, investors have a critical role to play in shaping the future of corporate responsibility.

“As shareholders, we have the ability to influence corporate behaviour. We can engage with management, push for greater transparency, and hold companies accountable for their ESG commitments,”

Roman said.

Hosking Partners takes this approach seriously, actively engaging with the companies in their portfolio to drive positive change. Whether it’s advocating for stronger environmental policies or ensuring companies are managing their supply chains responsibly, Roman believes that active ownership is a key part of responsible investing.

“There’s a responsibility that comes with being an investor. It’s not just about making money; it’s about ensuring that the companies we invest in are future-proof, both economically and environmentally,” he added.

 

The Challenge of Measuring Impact

A recurring theme throughout the podcast was the difficulty in measuring the true impact of ESG investments. While some aspects, such as a company’s carbon emissions, are relatively straightforward to quantify, others are far more ambiguous. Roman gave the example of scope 3 emissions, which include indirect emissions from a company’s supply chain and the end-use of its products.

“It’s relatively easy to measure a company’s direct emissions, but when you get into scope 3 emissions, it becomes much more complicated. Should a car manufacturer, for example, be held responsible for the emissions from drivers using its cars? Or should that be the responsibility of the petrol companies?” Roman asked.

This ambiguity makes it difficult for investors to assess the real impact of their investments. Roman pointed out that while the financial industry has made significant progress in measuring ESG factors, there is still much work to be done to develop more accurate and reliable metrics.

“We’ve poured huge amounts of money and time into trying to solve this quantification problem, but in my view, it hasn’t really been solved. There’s still a long way to go in terms of measuring the impact that investments have on the environment and society,” Roman explained.

 

The Importance of Not “Deselecting” Yourself

Throughout the conversation, Roman shared his personal experiences and the lessons he’s learned throughout his career. One of the key messages he emphasised was the importance of not “deselecting” yourself from opportunities, particularly in industries like finance, where non-traditional backgrounds are often underrepresented.

“I think one of the most important lessons I’ve learned is to never deselect yourself from something. It’s easy to feel like you don’t fit the mould, especially in industries like finance, but I’ve found that my diverse background has actually been an asset,”

Roman said.

He encouraged listeners to embrace their unique experiences and not to be discouraged by imposter syndrome. Whether transitioning into a new field or pursuing a leadership role, Roman’s advice is to remain confident and not shy away from opportunities.

“Everyone suffers from imposter syndrome to some degree. The key is not to let it guide your decisions. There’s absolutely a role for generalists in finance and other industries. It’s about recognising the value of your diverse experiences and not taking yourself out of the game before you’ve even had a chance to play,” he concluded.

A Call for Transparency and Long-Term Thinking

Roman Cassini’s insights into impact investing and greenwashing serve as a powerful reminder of the importance of transparency, active ownership, and long-term thinking in today’s investment landscape. While the challenges of measuring real impact remain, investors can make a difference by engaging with the companies they invest in, holding them accountable, and pushing for meaningful change.

As the world faces unprecedented challenges like climate change and the energy transition, the role of ESG investing has never been more critical. By adopting a long-term perspective and refusing to be swayed by short-term gains, investors can ensure that their money is not just generating returns, but also making a positive impact on the world.

In the words of Roman, “We need to be honest about the impact we can have and ensure that we’re not overstating what’s being achieved. Real change takes time, and we have to be prepared to play the long game.”