Jim Ratcliffe, CEO of INEOS, a British multinational petrochemicals company, has bought or become lead sponsor of multiple sports teams, including Mercedes Formula 1, Team INEOS Cycling, Breaking 2, New Zealand Rugby ‘Teams in Black’ and Team INEOS America’s cup. From an outside perspective, a chemicals company dedicating almost 500 million GBP in sports would seem strange, however this has become known as “Sportswashing”. This is the practice of sponsoring a popular sporting team or event in order to launder a company’s reputation. This has been prevalent for some time, with Coca-Cola first paying to associate itself with the Olympic Games in 1928, McDonald’s joining them in 1976, and Marlboro spending decades sponsoring McLaren’s Formula One team. More recently, the owners of Manchester City and Paris Saint-Germain have applied the same approach at a nation-state level.
The first acquisition INEOS made was the Swiss sports team Lausanne-Sport, a weak football team rapidly relegated from its league. Since then, INEOS has been on a drive to associate itself with the most high-performance programmes in sport. However, this has not gone unnoticed amongst investors. Environmental activists have been critical of the actions, as the company is renowned for its polluting activities, such as gas fracking in the UK. The accusation is that despite INEOS’s environmentally damaging work, it is more well known as owning the greatest cycling team and a Formula 1 team. The sports that INEOS sponsors tend to be ones with a focus on sustainability, for example F1 continuing with a hybrid and a zero-carbon fuel, paving the way for the transport of the future.
This begs the question of whether INEOS’s sponsoring of these teams does indeed improve their ESG rating. The definition of ESG is central to this discussion. INEOS is arguably successfully fulfilling Social and Governance criteria, as Jim Ratcliffe can be seen as a philanthropist, supporting not only his own pleasure but also that of society as a whole. However, regarding environmental criteria, INEOS’s use of petrochemicals has contributed to significant pollution. Ratcliffe has attempted to make changes at the company, by calling for greater use of green power and clean heat as well as a reduction in plastic use. This has resulted in INOVYN, the green subsidiary of INEOS, through which 2 billion EUR has been invested for green hydrogen across Europe.
More recently, the take-over of Newcastle Football club by Saudi Arabia’s Public Investment Fund (PIF) for 300 million GBP has caused global headlines. Amnesty International described the takeover as an ‘extremely bitter blow for human rights defenders’ and questions have been raised over the consequences of “sportswashing” by Saudi Arabia. Amnesty has repeatedly warned that Saudi Arabia, under Crown Prince Mohammed bin Salman, has embarked on a programme of “sportswashing” to try and obscure Saudi Arabia’s extremely poor human rights record. In recent years, the Saudi authorities have hosted a string of high-profile international sporting events, but the acquisition of Newcastle United is Saudi Arabia’s first move into ownership of a top-tier football club. The question remains as to whether this investment into sport from Saudi Arabia increases investor confidence in the country with the severe social problems affecting ESG ratings nationwide.
These companies and institutions involved in sport are rarely expecting to make money from the enterprise. While sportswashing has long been a popular tactic, 2022 is a particularly concerning year because both the Olympic Games and the World Cup – the two most-watched sporting events in the world – are being hosted in countries with markedly oppressive regimes. Despite the harrowing reports of death and abuse in the construction of World Cup stadiums, FIFA president Gianni Infantino announced on 30 December that the 2022 World Cup in Qatar was a “celebration of football and social inclusion”.
Sportswashing in these situations can be seen equal to, if not worse than greenwashing, often disguising dirty business as opposed to having any positive impact on the world. Investment in positive social policies allows investors to validate an in-house subjective ESG score based on the often positive Social and Governance ratings given to sports teams. Jim Ratcliffe claims that INEOS does not expect to make money from sport, with people close to him say he is chasing emotional returns over financial ones; undoubtedly the sport investment and advertisement they receive has a positive public influence on the brand. It is a luxury that few sporting outfits can afford. On the other hand Andy Gheorghiu, a policy adviser at Food & Water Europe, an NGO, states, ‘He uses sports to greenwash his fracking [and] dirty plastics business.’
It remains to be seen whether the sportswashing is genuine philanthropic behaviour or a desperate attempt to distract shareholders and the general public from environmental crimes. This is particularly pertinent in an age when ESG ratings increasingly govern portfolios, perhaps more so than real returns.
By Louis Christie
Sector Head: Philipp Jiang