Setareh Heshmat on ESG, Ethics, and the Fight Against Corporate Greenwashing

In an era where Environmental, Social, and Governance (ESG) frameworks have become a marketing badge rather than a sincere mission, Setareh Heshmat has emerged as one of the most vocal critics of corporate greenwashing. As the Director of ESG Investments at a leading venture capital firm in Singapore, Heshmat has spent over a decade navigating the tightrope between financial performance and ethical responsibility. Now, she's calling out the systemic issues that allow ESG to be manipulated, diluted, and at times, weaponized for profit.

The Mirage of ESG Labels

“ESG has become a checkbox exercise,” Heshmat says bluntly in her interview. “Many companies have learned how to look responsible without being responsible.”

She points to the explosion of ESG-themed investment funds and sustainability reports as proof of performative virtue. “What worries me is that retail investors, and even institutional ones, are being misled by sustainability indices that rarely interrogate what’s happening under the surface,” she adds.

In one example, she highlights a logistics company that claimed carbon neutrality by purchasing low-quality offsets — while still expanding its diesel truck fleet across Southeast Asia. “They ticked the ESG box, but did nothing transformative. That’s greenwashing at its worst.”

Data Without Depth

According to Heshmat, part of the problem lies in how ESG data is collected, rated, and interpreted. “You have three different rating agencies giving a company three completely different ESG scores. There's no consistency. It’s noise masquerading as science.”

She argues for a new generation of ESG analytics — ones that combine qualitative due diligence with quantitative performance. Her team, for instance, uses independent audits, whistleblower feedback, and on-ground data from NGOs as part of their investment screening process. “We look beyond the deck and into operations,” she explains.

Investors Must Share the Blame

But Heshmat doesn’t just blame corporations — she also calls out investors for being complicit. “Many LPs want ESG funds, but still demand the same IRR targets with shorter exit timelines. That creates enormous pressure to cut corners.”

To fight that, she’s spent the last few years educating investors on blended value — the idea that financial returns and measurable impact can coexist, but require patience and active governance.

Her firm now includes impact covenants in term sheets, which bind founders to specific ESG goals, with performance bonuses tied to outcomes like gender equity in hiring, carbon reduction, or supply chain transparency.

Personal Ethics in a Broken System

This crusade is deeply personal. Early in her career, Heshmat advised a fast-growing agri-tech startup that claimed to be helping smallholder farmers. “Everything looked perfect on paper,” she says. “But when I visited their operations in rural Thailand, I found pesticide runoff, unpaid workers, and forged compliance records.”

She left the deal — but not without fallout. “I got labeled ‘difficult’ by a few partners,” she recalls. “That’s when I realized ESG is meaningless unless you’re willing to walk away from profit.”

Since then, Heshmat has taken a hardline approach in her portfolio, often asking hard questions others avoid. “If you’re not willing to lose a deal over ethics, then ESG is just branding.”

A Call for Structural Change

Despite her criticism, Heshmat remains hopeful. She advocates for third-party ESG verification, open-source impact metrics, and even regulatory oversight for ESG labeling — similar to what’s emerging in the EU and Australia.

“We need a global baseline,” she insists. “Voluntary disclosure is not enough. It’s like asking students to grade their own exams.”

In Singapore, she’s working with policymakers to develop ESG guidelines tailored to ASEAN markets — a region she believes has unique sustainability challenges that global frameworks often overlook.

What’s Next?

Heshmat is now spearheading a new initiative within her firm: a $100 million Southeast Asia ESG Seed Fund, aimed at supporting early-stage startups committed to real impact — particularly those led by women or underrepresented founders. The fund will require public impact reporting and will deploy a blended capital structure to reduce risk for mission-driven founders.

“We’re done waiting for change to trickle down,” she says. “We’re building the new ESG ecosystem from the ground up.”

Conclusion

Setareh Heshmat represents a rare breed of investor — one willing to sacrifice short-term gains in pursuit of long-term, authentic transformation. In an industry that often prioritizes perception over principles, her voice is both a challenge and a guidepost for what ESG investing could become.

As she puts it, “Sustainability without truth is just another business model. And we don’t have time for that anymore.”