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LONDON (Reuters) -The variety of situations of greenwashing by banks and monetary companies firms around the globe rose 70% prior to now 12 months from the earlier 12 months, a report on Tuesday confirmed.
European monetary establishments accounted for many of these situations, and far of the greenwashing concerned claims about fossil fuels.
Environmental, social and governance (ESG) information agency RepRisk recorded 148 circumstances from the banking and monetary companies trade globally within the 12 months to the tip of September 2023, up from 86 in the course of the earlier 12 months.
Of the 148 circumstances, 106 have been by European monetary establishments.
The European Banking Federation mentioned RepRisk’s report comprised allegations somewhat than verified claims of greenwashing.
Greenwashing includes an organisation making deceptive sustainability-related claims to traders or customers, normally to spice up its fame and backside line.
Regulators need to stamp out greenwashing to spice up shopper and investor confidence and assist encourage additional cash in the direction of sustainable investments, though there isn’t a authorized definition of what greenwashing is but.
RepRisk, which says it has information going again to 2007, considers greenwashing to have occurred when a agency makes deceptive communications on the setting.
It seems to be for such communication by analysing public sources of data and stakeholders, somewhat than the knowledge firms have printed. For instance, analysis findings revealing that an organization has overstated the impression of an initiative could be tallied as a case of greenwashing.
“Over 50% of those climate-specific greenwashing threat incidents both talked about fossil fuels or linked a monetary establishment to an oil and fuel firm. These incidents aren’t occurring in isolation and regulators are more and more conscious of the size of the issue,” RepRisk mentioned.
European Banking Federation (EBF) mentioned the rise in greenwashing claims could also be linked to elevated scrutiny of banks and their sustainability commitments, somewhat than deliberate misrepresentations by lenders.
Banks play a key function financing firms’ decarbonisation efforts, together with in high-emission industries, the EBF mentioned. The “idea of transition finance just isn’t well-defined, and this lack of readability can result in unsubstantiated greenwashing accusations,” a spokesperson added in an emailed assertion.
UK Finance, which represents the banking and finance trade, mentioned in an announcement that corporations throughout the sector had put environmental and social accountability “on the core of their methods”. It’s working with regulators on transparency and ESG product labelling, it added.
European Union watchdogs in June put ahead a “widespread high-level understanding” of greenwashing and mentioned banks, insurers and funding corporations throughout the bloc had made “deceptive claims” about their sustainability credentials to traders.
The banking and monetary companies trade is second solely to grease and fuel for the variety of greenwashing incidents, RepRisk mentioned.
The information agency discovered that greenwashing extra broadly was on the rise.
One in each 4 climate-related ESG threat incidents was linked to greenwashing, a rise from one in 5 final 12 months, it mentioned, whereas it additionally discovered that one in three firms tied to greenwashing was additionally embroiled in so-called “social washing”.
It outlined social washing as firms presenting themselves positively by “obscuring an underlying social challenge” – comparable to human rights abuses and company complicity, or impacts on communities – to guard their fame and monetary efficiency.
“Deceptive communication round environmental and social matters not solely impedes progress in the direction of collective objectives, but additionally damages belief with customers and traders,” RepRisk wrote in its newest report.