In a significant pivot echoing across the financial world, BlackRock co-founder Larry Fink declared in 2023 that he had ceased using the term ESG, an acronym for environmental, social, and governance, citing its unfortunate "weaponization" by both the far left and far right. This high-profile disavowal, however, did not signal a retreat from sustainability considerations for the world’s largest asset manager. Instead, BlackRock affirmed its continued commitment to assessing the risks and opportunities presented by the low-carbon transition, an approach it maintains is "consistent with its fiduciary duty." This strategic recalibration, observed by experts like Wharton professor Serguei Netessine, serves as a quintessential illustration of a burgeoning corporate phenomenon: greenhushing.
Greenhushing, a concept gaining critical traction, describes a company’s deliberate decision to communicate less about its sustainability initiatives than what is externally observable. It stands in stark contrast to greenwashing, the widely recognized practice of overstating or misrepresenting environmental efforts. Professor Netessine, a professor of operations, information and decisions and senior vice dean for innovation and global initiatives at Wharton, succinctly defines the two: "Greenwashing is when you talk more than you do, and greenhushing is when you do more than you talk." His new co-authored working paper, "Value of Silence: Determinants and Consequences of Greenhushing," reveals a compelling and counterintuitive finding: firms that greenhush tend to experience higher subsequent abnormal stock returns, whereas those engaging in greenwashing typically see lower returns. This suggests a fundamental shift in how investors perceive and reward corporate environmental engagement, placing a premium on credible action over verbose rhetoric.
Unpacking the Greenhushing Phenomenon
The core insight of Netessine’s research is that investor confidence is not built on the volume of environmental communication, but rather on the verifiable substance of a company’s environmental conduct. Crucially, the study emphasizes that silence alone does not generate value. Greenhushing, as a relative gap, only yields positive returns when limited communication is unequivocally backed by robust, externally observed environmental performance. This distinction is vital; it differentiates a truly sustainable company choosing discretion from one merely lacking transparency or action.
The paper, co-authored by Sonam Singh (University of South Florida), Ashwin Malshe (University of Texas at San Antonio), Yakov Bart (Northeastern University), and Anatoli Colicev (University of Liverpool), challenges traditional disclosure theories that posit greater transparency reduces information asymmetry and leads to higher valuations. While historically true, the relationship between corporate communication and investor value in the sustainability realm appears to have evolved, particularly in recent years.
A Chronology of Shifting Paradigms
The trajectory of corporate environmental disclosure has undergone significant transformations over the past two decades. In the early 2000s, Corporate Social Responsibility (CSR) gained prominence, often manifesting as philanthropic initiatives or basic environmental compliance reporting. By the mid-2200s, the concept of ESG investing began to mature, moving beyond ethical screens to integrate environmental, social, and governance factors into mainstream financial analysis and investment decisions. Major financial institutions, including BlackRock, became vocal proponents, championing ESG as a critical lens for long-term value creation and risk management. Larry Fink’s annual letters to CEOs, particularly from 2018 onwards, increasingly emphasized climate risk and the importance of sustainability reporting, pushing companies to articulate their strategies for a low-carbon future.
However, a notable shift began around 2017 and intensified in subsequent years. The ESG movement, once largely seen as a consensus-driven force for good, became increasingly politicized, particularly in the United States. Conservative factions criticized ESG as "woke capitalism," arguing it diverted corporate focus from profit maximization and fiduciary duties towards social engineering. Simultaneously, some environmental activists and progressive investors argued that ESG initiatives were often insufficient, amounting to mere tokenism or "greenwashing" without driving real systemic change. This dual pressure created a challenging environment for companies navigating sustainability communication, making any public statement a potential lightning rod for criticism. It is within this "more politicized disclosure regime" that the conduct-communication gap, indicative of greenhushing, began to expand significantly, as identified by Netessine’s research. Larry Fink’s 2023 declaration can be seen as a culmination of this trend, a strategic response to an increasingly polarized discourse surrounding ESG.
The Methodology Behind the Findings
Measuring the elusive phenomena of greenhushing and greenwashing has historically been challenging, often relying on indirect proxies. Netessine and his co-authors adopted a novel and large-scale approach, aiming to quantify the misalignment between external conduct and managerial communication. Their methodology involved analyzing over 30 million sentences from the earnings call transcripts of 3,727 U.S. firms spanning from 2005 to 2021. This massive textual dataset provided a direct measure of the volume of environmental discussion initiated by company management.
To gauge actual environmental conduct, the researchers utilized TruValue Labs’ environmental Pulse Scores. These scores synthesize recent public information from a diverse array of sources – including news outlets, regulatory bodies, and civil-society organizations – to summarize the valence (positive or negative) of a firm’s environmental policies, actions, and outcomes. Crucially, these Pulse Scores represent an external, independent signal of a company’s environmental performance, distinct from its self-reported data or direct audits of emissions. By comparing the internal communication volume from earnings calls with these external conduct scores, the researchers were able to quantify the "conduct-communication gap," thereby identifying instances of greenhushing (when observed conduct is stronger than communication) and greenwashing (when communication outpaces observed conduct).
The results of this rigorous analysis were striking. In their most comprehensively adjusted model, a one-standard-deviation increase in greenhushing was associated with a 2.29 percentage point increase in three-month cumulative abnormal returns. For an average sample firm, this translates to an impressive gain of approximately $238 million. Conversely, an equivalent shift towards greenwashing was correlated with a 2.29 percentage point decrease in three-month cumulative abnormal returns. These figures underscore the material financial implications of a company’s approach to sustainability communication.
The Political and Competitive Drivers of Greenhushing
Why would companies choose to under-communicate their sustainability efforts, especially when these efforts are genuine and impactful? Professor Netessine points to several compelling reasons rooted in the current business and political landscape. "Management chooses to say relatively little because talking has become costly," he explains. Making environmental claims in the current climate can attract a multitude of unwelcome consequences: heightened political criticism from opposing ideological camps, increased scrutiny from regulators, potential legal challenges from activist groups or disgruntled investors, and the cultivation of unrealistic expectations among stakeholders.
Beyond these external pressures, internal strategic considerations also play a significant role. Companies in highly competitive industries, for instance, may be reluctant to disclose innovative sustainable practices that provide a competitive edge. If a new process reduces resource consumption, saves money, or enables the creation of superior products, keeping that information proprietary can be a strategic advantage. Revealing such innovations prematurely could allow competitors to quickly emulate them, eroding the first-mover advantage.
The study also found that greenhushing is more prevalent among firms with greater financial leverage. This suggests that highly leveraged companies, perhaps more sensitive to financial risk and with less margin for error, may be particularly cautious about making public commitments that could attract scrutiny or impose unforeseen costs. The perceived risks of over-communication, whether reputational, legal, or competitive, appear to outweigh the potential benefits of transparency for these firms.
Investor Credibility and the ‘Walk vs. Talk’ Imperative
The core message for investors and corporate leaders alike, according to Netessine, is that credibility has become the ultimate currency. "What we take from all of this is not that investors love silence. Investors appear to reward credibility," he states. In an era saturated with information and often plagued by skepticism, investors are increasingly looking beyond corporate press releases and flashy sustainability reports. If external evidence demonstrates that a company is genuinely making progress on environmental fronts, simply reiterating those efforts verbally does not necessarily garner additional reward. "Investors seem to care more about the walk than the talk," Netessine concludes, emphasizing the primacy of observable action.
This perspective aligns with a broader trend among sophisticated investors who are employing more advanced analytics and independent data sources to evaluate ESG performance. The proliferation of ESG data providers, satellite imagery for monitoring environmental impact, and AI-driven sentiment analysis of public discourse all contribute to a more robust, externally verifiable picture of corporate sustainability. In such an environment, mere assertions from management carry less weight than independently corroborated evidence of positive environmental conduct.
Implications for Corporate Strategy and Future Reporting
While the study highlights the financial benefits of greenhushing, Professor Netessine cautions against interpreting this as a blanket recommendation for companies to cease all environmental communication. "Our conclusion is don’t let communication run ahead of conduct," he advises. The critical takeaway for managers is to approach environmental communication with the same rigor and discipline applied to financial disclosures: "You should manage your environmental communication the same way you manage your financial communication. Don’t make claims you can’t support."
Companies are already adapting their communication strategies, focusing on building credibility while mitigating risk. This involves not just managing the intensity of communication, but also the quality of the wording and tone. Environmental efforts, Netessine stresses, must be directly tied to business results and strategic objectives. "To say that you are saving the penguins is great, but what does it have to do with your business model?" This provocative question underscores the need for genuine integration of sustainability into core business operations, rather than treating it as a peripheral philanthropic endeavor.
For investors, the implications are profound. The study serves as a powerful reminder to "look beneath the surface." A company that is not vociferously touting its environmental credentials, or even one that has publicly withdrawn from a climate organization, is not necessarily inactive or irresponsible. Conversely, a company that consistently highlights its green policies at every opportunity may, in reality, be doing far less than its rhetoric suggests. This necessitates a more diligent, investigative approach to investment analysis, moving beyond superficial disclosures.
"Don’t confuse communication intensity with quality. And don’t invest in rhetoric," Netessine warns. "Investigate the gap between rhetoric and reality." In a world where the term "ESG" itself has become a battleground, understanding the nuanced dynamics of greenhushing and greenwashing is no longer just an academic exercise but a crucial imperative for navigating the complexities of modern corporate sustainability and making informed investment decisions. The silent revolution of greenhushing may well be shaping the next era of credible, impactful corporate environmental stewardship.
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