The banking and financial services sectors saw a 70% increase in the number of climate-related greenwashing incidents in the past year, according to a report. Over 50% of these climate-specific greenwashing risk incidents either mentioned fossil fuels or linked a financial institution to an oil and gas company, according to the report by RepRisk, an ESG data science company.
Greenwashing means an organisation making misleading sustainability related claims to investors or consumers, usually to boost its reputation and bottom line.
These incidents are not happening in isolation and regulators are increasingly aware of the scale of the problem, it said.
While greenwashing incidents have accelerated globally, the practice has experienced significant growth in Europe and the Americas, particularly in the banking and financial services sectors.
The banking and financial services industry is second only to oil and gas for the number of greenwashing incidents, RepRisk said.
Getting complex
“The structure of greenwashing has evolved and become more complex, even since last year’s report. Greenwashing now goes beyond directly misleading consumers – its scope extends to include pledges, certifications, and commitments. The lack of accountability helps to further obscure greenwashing, making it possible for companies to benefit from setting future goals, without addressing issues head on, the report said.
one out of every four climate-related ESG (Environmental, Social, and Governance) risk incidents has been associated with greenwashing, marking an increase from the previous year’s figure of one in five. Additionally, the report identified that one in three companies engaged in greenwashing practices was also entangled in what is termed “social washing.”
The term “social washing” is defined as the act of companies portraying themselves in a positive light while concealing underlying social issues. These issues may include human rights violations, corporate involvement in such violations, or adverse impacts on communities. Such tactics are often employed to safeguard a company’s reputation and financial performance.
The report underscores that deceptive communication regarding environmental and social matters not only hinders progress towards collective objectives but also erodes trust among consumers and investors.
