According to a survey released on Tuesday, there were 70 percent more cases of greenwashing by banks and financial services providers globally in the last year compared to the year before.
The majority of those events were due to European financial institutions, and much of the greenwashing involved assertions regarding fossil fuels.
The worldwide banking and financial services business was involved in 148 incidents, up from 86 the year before, according to environmental, social, and governance (ESG) data provider RepRisk.
106 of the 148 instances involved financial institutions in Europe.
The European Banking Federation claimed that RepRisk’s study contained more unsubstantiated allegations of greenwashing than it had actual proof.
An organisation engages in “greenwashing” when it presents false sustainability claims to consumers or investors, typically in an effort to enhance its reputation and financial performance.
Although there is no official definition of what greenwashing is yet, regulators want to stop it in order to increase investor and consumer confidence and to help encourage more money to go into sustainable ventures.
According to RepRisk, which claims to have data going back to 2007, a company engages in greenwashing when its environmental statements are deceptive.
Instead of assessing information that businesses have disclosed, it hunts for this type of communication through analysing public sources of information and stakeholders. For instance, research data showing that a business exaggerated the effects of a project would be considered a case of greenwashing.
“Over 50 percent 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.
The European Banking Federation (EBF) suggested that rather than willful deception on the part of lenders, the rise in greenwashing charges may be related to increasing scrutiny of banks and their sustainability pledges.
According to the EBF, banks are essential to finance businesses’ decarbonization initiatives, particularly in high-emission sectors.
The “concept of transition finance is not well-defined, and this lack of clarity can lead to unsubstantiated greenwashing accusations,” a spokesman stated in an email statement.
Environmental and social responsibility have been positioned “at the core of their strategies” by businesses throughout the sector, according to a statement from UK financial, which represents the banking and financial industry. It stated that it is collaborating with regulators on transparency and ESG product labelling.
In June, watchdogs for the European Union claimed that there was a “common high-level understanding” of the term “greenwashing” and that banks, insurers, and investment businesses all around the bloc had made “misleading claims” about their sustainability credentials to investors.
According to RepRisk, the oil and gas sector has the most instances of greenwashing, followed by the banking and financial services sector.
The data company discovered that there was an increase in greenwashing generally.
It was revealed that one in three businesses connected to greenwashing were also involved in what is known as “social washing,” and that one in four climate-related ESG risk incidents were linked to greenwashing, up from one in five last year.
In order to safeguard their reputation and financial performance, corporations that engage in social washing present themselves favourably by “obscuring an underlying social issue” (such as human rights violations, corporate culpability, or affects on communities).
“Misleading communication around environmental and social topics not only impedes progress towards collective goals, but also damages trust with consumers and investors,” RepRisk wrote in its latest report.