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% 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. The "concept
of transition finance is not well-defined, and this lack of clarity can lead to
unsubstantiated greenwashing accusations," a spokesperson added in an
emailed statement.
UK Finance, which represents the banking and finance
industry, said in a statement that firms across the sector had put
environmental and social responsibility "at the core of their
strategies". It is working with regulators on transparency and ESG product
labelling, it added.
European Union watchdogs in June put forward a "common
high-level understanding" of greenwashing and said banks, insurers and
investment firms across the bloc had made "misleading claims" about
their sustainability credentials to investors.
The banking and financial services industry is second only
to oil and gas for the number of greenwashing incidents, RepRisk said.
The data firm found that greenwashing more broadly was on
the rise.
One in every four climate-related ESG risk incidents was linked
to greenwashing, an increase from one in five last year, it said, while it also
found that one in three companies tied to greenwashing was also embroiled in
so-called "social washing".
It defined social washing as companies presenting themselves
positively by "obscuring an underlying social issue" - such as human
rights abuses and corporate complicity, or impacts on communities - to protect
their reputation and financial performance.
"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. -Reuters