As world leaders continue to gather at the COP27 conference in Egypt, many climate questions remain unanswered. The Global Alliance for Banking on Values (GABV) has urged the financial industry to take serious action to help tackle the climate crisis.
The GABV, a global network of value-based banks, has called upon the financial sector to match their rhetoric with serious, transformative action. On 10 November 2022, the network marks ‘Banking On Values Day’ by calling for banks and financial institutions to take more care in how they present themselves. Wednesday 9 November saw ‘Finance Day’ take place at the COP27 conference.
Martin Rohner, executive director at the GABV, explained the importance for banks to take the call seriously. He said: “As we have stated in Our Approach to Real Impact, words that are increasingly common in the financial industry: ‘Sustainability’, ‘ESG’ (Environmental, Social, Governance), ‘social impact’, ‘net zero’ or ‘climate action’, must be underpinned by a clear connection to the values that guide the overall business, otherwise they cannot be genuinely transformative.
“ESG criteria, for example, will only have a positive impact if there is a deep understanding and agreement by the senior leadership about the social and environmental impact it wants to achieve through the business. Without such anchoring, ESG becomes purely transactional and void of meaning.”
Lack of progress
During 2021’s Glasgow COP26 conference, mainstream financial institutions issued a variety of public commitments pledging to tackle the climate crisis. The commitments also outlined moves to progress a move towards net zero.
Despite these commitments, the finance industry appears to have made little change. Finance Watch‘s ‘A safer transition for fossil banking‘ report outlines worrying statistics surrounding the continued financing of the fossil fuel industry. The financial research organisation estimates that the 60 largest global banks have around $1.35trillion of credit exposures to fossil fuel assets.
It is clear that this lax attitude is becoming increasingly more of a deterrent to customers. According to research by carbon footprint management company Cogo, around 75 per cent of UK mobile banking customers want to know more about the environmental consequences of their spending. As time passes, more consumers are making environmentally conscious decisions. Many banks have recognised this, releasing campaigns to highlight how environmentally conscious they have been. However, these efforts have not been completely transparent.
Putting an end to greenwashing
As recently as October 2022, HSBC had two ‘climate change’ adverts banned by the Advertising Standards Authority (ASA). The bank’s adverts were banned for omitting information about HSBC’s negative contributions to the climate. The UK bank launched an ad campaign pledging to provide up to £880billion ($1trillion) in financing and investment globally. Each of the adverts donned the tagline ‘Climate change doesn’t do borders’.
The campaign was banned, following 45 individual complaints to the ASA about the ads. The UK regulator explained that the campaign “omitted material information” concerning HSBC’s contribution to pollution.
Greenwashing is the practice of exaggerating a company’s or product’s green credentials, thereby misleading consumers and hindering meaningful climate action. Examples of greenwashing such as HSBC’s ad also appear to be on the rise. Financial institutions include more positive environmental spins in marketing campaigns as more consumers choose the most sustainable products or services.
Martin Rohner spoke to The Fintech Times about what the financial industry can do to prevent greenwashing. Rohner explained: “To prevent greenwashing, banks need to be clear and transparent about their guiding values.
“Because of their responsibility, banks must show if and how they contribute with their business to society and the planet. They must show how they avoid financing harmful activities and demonstrate how they ensure that client relationships are fair and transparent.
“Values-based banks have a clear set of values to inform and guide decision-making, as well as engagement with clients and communities. These values are intentional and integrated into the business model; they are never simply an add-on.”