Green Finance Booming, But Greenwashing Threat Casts Shadow

Massive Climate Commitments Across Markets

Major institutional players like Canada’s Caisse de dépôt et placement du Québec (CDPQ) have committed a staggering CA$400 billion toward climate-related investments by 2030.

Elsewhere, platforms such as SAP–Climeworks and the Nasdaq Carbon Academy are helping corporations build carbon dioxide removal (CDR) and net-zero strategies as pressure mounts on businesses to meet their decarbonisation targets.

At the same time, the Gulf Cooperation Council (GCC) region has rapidly emerged as a key player in sustainable finance. The region is witnessing a surge in issuances of green bonds, sustainability-linked loans (SLLs), and sukuks.

In recent months, entities like DP World successfully raised green sukuks, while several Saudi Arabian banks have entered the sustainable bond market. This financial momentum reflects growing investor appetite for ESG-compliant instruments and the region’s attempt to diversify its fossil fuel-reliant economies.

Greenwashing Risks Erode Market Credibility

Despite this growth, persistent allegations of greenwashing have raised alarm bells. Investigative reports and market audits have uncovered that billions of dollars raised through sustainability-linked loans have been channelled into companies with questionable environmental records.

Some firms, while securing green financing, have continued practices that directly contradict climate goals — from excessive emissions to environmentally destructive projects.

The credibility gap largely stems from inconsistencies in ESG reporting standards and limited oversight. While regulators in the GCC, Europe, and parts of Asia have begun tightening disclosure norms and compliance frameworks, a lack of universally enforceable standards allows firms to make ambitious claims without delivering meaningful environmental outcomes.

Regulators, Markets Seek Stronger Accountability

In response, regulators and exchanges worldwide are refining ESG and climate disclosure rules to combat greenwashing. The GCC is advancing region-specific ESG reporting mandates, while global platforms like Nasdaq and London Stock Exchange are enhancing guidelines for green debt instruments and sustainability-linked financial products.

Moreover, new financial technologies and digital ESG tracking tools are being adopted to verify carbon accounting and investment impact.

AI-powered platforms now offer real-time data analysis to detect discrepancies between reported ESG metrics and actual corporate practices, aiming to restore market integrity.

The Way Forward

For sustainable finance to genuinely support climate action, market participants and regulators must close loopholes and adopt stricter, transparent frameworks. As investment flows into climate finance swell, the focus must shift from volume to verified impact.

Without accountability, the risk is not just reputational damage for individual firms — but erosion of public trust in the very mechanisms designed to combat the climate crisis.