Banks behind 70% jump in greenwashing incidents in 2023

LONDON – The number of instances of greenwashing by banks and financial services companies around the world rose 70 per cent in the past 12 months from the previous 12 months, a report on Tuesday showed.

European financial institutions accounted for most of those instances, and much of the greenwashing involved claims about fossil fuels.

Environmental, social and governance (ESG) data firm RepRisk recorded 148 cases from the banking and financial services industry globally in the 12 months to the end of September 2023, up from 86 during the previous 12 months.

Of the 148 cases, 106 were by European financial institutions.

The European Banking Federation said RepRisk’s report comprised allegations rather than verified claims of greenwashing.

Greenwashing involves an organisation making misleading sustainability-related claims to investors or consumers, usually to boost its reputation and bottom line.

Regulators want to stamp out greenwashing to boost consumer and investor confidence and help encourage more cash towards sustainable investments, although there is no legal definition of what greenwashing is yet.

RepRisk, which says it has data going back to 2007, considers greenwashing to have occurred when a firm makes misleading communications on the environment.

It looks for such communication by analysing public sources of information and stakeholders, rather than the information companies have published. For example, research findings revealing that a company has overstated the impact of an initiative would be tallied as a case of greenwashing.

“Over 50 per cent of these climate-specific greenwashing risk incidents either mentioned fossil fuels or linked a financial institution to an oil and gas company. These incidents are not happening in isolation and regulators are increasingly aware of the scale of the problem,” RepRisk said.

European Banking Federation (EBF) said the rise in greenwashing claims may be linked to increased scrutiny of banks and their sustainability commitments, rather than deliberate misrepresentations by lenders.

Banks play a key role financing companies’ decarbonisation efforts, including in high-emission industries, the EBF said.