Unmasking Corporate Greenwashing and Its Consequences for Financial System Integrity in Nigeria

This study investigates unmasking corporate greenwashing and its consequences for financial system integrity in Nigeria, with emphasis on firm financial performance, investor behaviour, and corporate governance mechanisms. Using a qualitative and case-based analytical approach supported by secondary data, the study examines how misleading environmental disclosures influence market outcomes and stakeholder trust. Empirical insights reveal that greenwashing significantly reduces firm financial value, particularly Return on Equity (ROE), as firms with higher levels of deceptive sustainability reporting experience weakened investor confidence, increased market volatility, and declining share performance. The findings further indicate that investors are becoming increasingly sensitive to sustainability claims and tend to react negatively to perceived corporate deception, leading to shifts in portfolio allocation and reduced capital inflows. The study also establishes that corporate governance plays a critical moderating role in reducing greenwashing practices. Firms with larger, more independent boards demonstrate lower tendencies toward environmental misrepresentation, highlighting the importance of strong governance structures in promoting transparency and accountability. Various forms of greenwashing are identified, including selective disclosure, decoupling, deceptive labelling, and manipulative reporting. The analysis of high-profile cases such as the Volkswagen Dieselgate scandal underscores the severe financial, reputational, and regulatory consequences of greenwashing. The study contributes to sustainable finance literature by emphasising the need for stronger ESG regulatory frameworks, third-party verification, and enhanced disclosure standards. It recommends stricter enforcement by regulatory bodies, improved investor due diligence, and the establishment of independent sustainability oversight mechanisms within corporate boards. The study concludes that greenwashing undermines financial system integrity by distorting market signals, eroding investor trust, and weakening sustainable finance development in Nigeria, thereby necessitating coordinated policy, governance, and stakeholder responses.