Carbonwashing: A New Type of ESG Greenwashing in a Post-Paris Climate Agreement World

Despite the increased attention and capital incentives to corporate sustainability, the development of sustainability performance reporting standards and monitoring systems has been at a slow pace. As a result, companies have misaligned incentives to deliberately or selectively communicate information not matched with actual environmental impacts or provide empty promises with no substance. These incidents are broadly called “greenwashing,”but there is no clear consensus on its definition and taxonomy. We pay particular attention to the threat of greenwashing of carbon emission reduction by coining a new term, “carbon washing.” Since carbon mitigation is the universal goal, the corporate carbon performance data supply chain is relatively more advanced than that of the entire sustainability data. Yet, the threat of carbon washing persist, even far more severe than general greenwashing due to financial values attached to corporate carbon performance. This Paper Contextualizes sustainable finance-related carbon washing via an outline of the measurement, reporting, and verification (MRV) of carbon emission mitigationperformance.It finally proposes several actionable policy recommendations on how industry stakeholders and government regulators can reduce carbon washing risks.