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Climate Responsibility in Banking: Bank Greenwashing (Chapter 5)

Updated July 3, 2025 by Katherine Markova & Anoushka Todd

In this episode of the series, Katherine dives into the world of the famous climate buzzword –greenwashing. What is it, why do banks do it, what happens when they get caught in the greenwashing act? We break down greenwashing red flags, from glaringly obvious signs to subtle indicators. Ever wondered how to act on a bank's suspected greenwashing activity? Read, or watch, Katherine's top tips.

What is greenwashing?

Anoushka: Hi Katherine, and thank you for joining us again in our Climate Responsibility in Banking series! This month, we're going to be talking about greenwashing. That's a word that comes up a lot in the climate space. So, the first question I'd love to ask – just to cover the basics – is: What is greenwashing?

Katherine: Good question. I'm sure there's an official definition, but the one I like to use is really easy to remember. It's the intersection of two behaviours: poor environmental performance and positive communication about environmental performance.

Greenwashing examples

Some examples include highlighting positive aspects of one's or a bank's performance while failing to mention others that are much more damaging and negative. It's about focusing on a tiny positive issue here while overlooking the elephant in the room over there. A classic example from old, established banks is that they love highlighting their renewable energy credentials, right? They'll tout them as a massive success—maybe they've just lent a hundred million dollars or pounds to a renewable energy project. But at the same time, they have two billion dollars or pounds in lending to the fossil fuel industry. So, their support for renewable energy pales in comparison to their ongoing support for the fossil fuel industry.

Another good example is banks' claims of carbon neutrality. Very often, these are based on purchasing carbon credits, which are often generated by reforestation, afforestation, or other forestry-based projects. If we imagine a scenario where a bank is funding new fossil fuel infrastructure development—by the way, there's plenty of deforestation that happens as you develop new infrastructure and build new pipelines—and then, on the other hand, they're planting a few trees elsewhere, these two activities are not comparable in terms of impact. When you chop down a mature tree, that's hundreds of years of carbon sequestration released into the atmosphere at once, whereas a seedling will take a hundred years to grow and sequester carbon.

So, in terms of impact, this is a really damaging activity. Planting trees is great—we need more trees—but it's not nearly enough to compensate for the deforestation that happened elsewhere. Those are a couple of examples. There are plenty more, but hopefully that gives you a feel for what greenwashing is.

Greenwashing incentives

Anoushka: What are the incentives for a bank to greenwash?

Katherine: These days, customers expect the companies they do business with – and that includes banks – to act responsibly, right? To operate in a responsible manner. The banking sector, by and large, is quite competitive in most countries. There are hundreds of alternatives to choose from in the U.K., the U.S., and elsewhere, and banking is also incredibly complex, isn’t it?

It’s very difficult for individual consumers—the industry term is “retail customers”– to distinguish greenwashing from genuine efforts to improve climate performance. It’s not like picking up a household product, reading the label, and seeing that it contains no sugar, only to check the ingredients and find sugar listed. That can be tricky, but it’s still much easier than with banks, where you’d have to sift through thousands of documents, many of which are completely impenetrable to the average retail customer.

Also, it’s not a requirement for banks to disclose, for example, their lending to fossil fuel companies. Even for those of us who are quite experienced in this area, it can be really difficult to find the source of truth. So, it’s easy for banks to get away with greenwashing.

How can banks be penalised?

Anoushka: What are some repercussions that they might encounter for greenwashing?

Katherine: I believe I’m correct in saying that there isn’t a specific law against greenwashing itself. However, there are consequences in many countries for misleading consumers more generally—at least in the E.U., U.K., and U.S. Companies have, for example, been sued for overstating the effectiveness of their products. Delta Airlines was recently sued in California for making misleading claims about carbon neutrality.

Increasingly, there is also regulation requiring banks to disclose certain data in line with established taxonomies. These standardised disclosures help to identify loopholes. So, while there isn’t a dedicated ‘greenwashing law’, there are other mechanisms to hold banks accountable if they mislead consumers.

Looking ahead, I think there’s a clear trend towards greater disclosure. Depending on the jurisdiction, there will likely come a time when banks must reveal their exposure to the fossil fuel sector. This should help consumers, activists, and advocates gain a fuller picture, providing more opportunities to hold banks accountable and challenge instances of greenwashing.

Greenwashing red flags in banking

Anoushka: And then my last question, in two parts, is: what might be some red flags that a bank is greenwashing? And what should you do as a consumer if you come across a bank that you think might be greenwashing?

Katherine: I love those questions. Red flags – there are so many. It’s fair to say that banks’ lending to and support for the fossil fuel sector has been under the spotlight for quite some time now, and there are databases and websites – such as Bank.Green – that show the extent to which banks lend to fossil fuel projects and companies.

Bonds issued by fossil fuel companies

However, a back door that’s been used in recent years is investment in bonds. This isn’t lending in the traditional sense, as you would to a retail customer, but rather investing in bonds – essentially debt instruments – issued by fossil fuel companies, which are much harder to detect. So, in theory, a bank could claim it has no lending to the sector, while in reality it does – just via a different mechanism.

Deceptive wording

Another red flag is the way some of these statements are worded. A bank might say it does not fund fossil fuel projects, while continuing to fund fossil fuel companies and their day-to-day operations. They may not be providing direct support for a new pipeline, for instance, but they could be providing funding to the head office so they can buy office supplies and pay rent.

Green bonds

There’s also the issue of green bonds, which has become increasingly popular. This can take various forms: banks investing in green bonds issued by fossil fuel companies to develop renewable energy portfolios or carbon capture equipment, for example. There are also banks issuing their own bonds – so a bank issuing a bond is essentially borrowing money to finance projects that it will then lend to or invest in. The problem is that money is fungible – a hundred pounds in the bank is a hundred pounds in the bank; there’s no way to ring-fence it. The way the proceeds from that bond are used is also important. If a bank tells me it needs to issue a bond to invest in X, Y, or Z, I expect them to do just that. But it’s difficult to hold banks accountable for actually doing the right thing, investing within the right timeframes, and not investing in technologies that may seem green, but actually aren’t – biomass, for example, is a good case. So, green bonds have attracted a fair amount of criticism and controversy.

Paperless banking

My absolute all-time favourite red flag is paperless statements. Banks that provide billions or trillions of pounds of funding to the fossil fuel sector will, in their sustainability reports, highlight their proudest achievement as helping customers go paperless. Frankly, “a drop in the ocean” doesn’t even describe it – it’s a rounding error. Paperless statements are just one example of these sorts of distractions.

Carbon footprint calculators

Another common tactic, especially among newer challenger banks, is offering a personal carbon footprint calculator. That’s fine, and it’s a nice perk – people are asking for it. But let’s not forget that we want banks themselves to become more sustainable, not just encourage their customers to do so. We need both, but let’s keep the big picture in mind.

Tree planting

And, as I mentioned earlier, banks planting trees. Don’t get me wrong – we all love trees, and they have multiple co-benefits, like cleaner air. But again, let’s put things into perspective. No matter how many trees a bank plants, what really matters is whether they finance the fossil fuel industry or renewable energy, and the mix between the two. That’s where the real impact lies.

Actionable insights

Katherine: As for what you can actually do when you spot instances of greenwashing – there’s plenty. First of all, check our website; it’s possible we’ve already exposed the instance of greenwashing you’ve identified. Take a look at the bank’s webpage and ours. If we haven’t covered it, let us know – contact us through the website so we can investigate and update that bank’s page. If it’s your bank, you can write to them, and we can provide some template language for you to use. And talk about it! We need to discuss climate change more – whether with friends, family, or anyone who will listen. Let’s elevate this topic and bring it to more people’s attention.

Anoushka: Thank you so much, Katherine – these are some really key, actionable items for anyone wondering how they can help with the energy transition and hold their banks accountable as we move towards a greener future. Thank you, Katherine, and see you next time!

Katherine: Thank you Anoushka, bye!

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