A new report has unveiled a 70% surge in instances of greenwashing by global banks and financial institutions through the past year.
Environmental, social, and governance (ESG) data firm RepRisk recorded 148 cases of misleading sustainability claims, with European financial institutions contributing to the majority of these cases. The report highlights the alarming trend of banks, the primary financiers of decarbonisation efforts, being accused of greenwashing.
The practice refers to misleading investors and consumers with unsubstantiated pledges of sustainability; it has become more of a problem in recent times as organisations push to make savings, strengthen eco-credentials and enhance their public image.
Regulators are grappling to combat the trend, despite their eagerness to bolster consumer and investor trust, and enable more funds to be channelled into authentically sustainable investment opportunities. One fundamental hurdle, however, is the current lack of a universally agreed legal definition of greenwashing, which RepRisk understands to have happened when a company sends out inaccurate information about its work to help the environment.
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Wednesday 18th October 2023, 15:00 - 16:00pm BST
According to RepRisk and its data that stretches back over 15 years, half of these misleading communications either pertained to the use of fossil fuels or linked financial entities to gas and oil firms. The European Banking Federation has said many of these shortcomings may not be deliberate, but instead come as a result of increased industry scrutiny.
Interestingly, greenwashing isn’t an isolated issue. It often intertwines with “social washing,” where companies conceal underlying social problems to preserve their reputation and financial standing. As such, the rise in these cases not only hampers progress toward collective environmental goals but also erodes trust with consumers and investors.
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Industry may be struggling to define clear boundaries, but business leaders and regulatory bodies – including the European Union – are working towards a shared understanding of greenwashing.
Amid this escalating concern, the spotlight falls upon all organisations to prioritise transparency and ethical practices so that we make genuine progress towards a more sustainable future.
The issues take centre stage at #RISK London, where experts discuss how companies can embrace ESG, meet evolving compliance standards and make a real difference to the world we live in.
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