A report by a group of European supervisory bodies has found that there is a “clear increase” in the total number of potential cases of greenwashing across all sectors of the financial industry, including for EU banks.

Greenwashing is a practice whereby organisations or individuals make misleading sustainability-related claims, statements, or communications which don't fairly reflect the true sustainability profile of a financial company, product or service.

The study, carried out by the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA), aims to outline a common understanding of greenwashing applicable across financial markets, banking, insurance, and pensions.

The report’s analysis also indicated that increased public attention to climate change has led to companies being held more accountable for their environmental policies, climate impact and disclosures.

The EU authorities say that pledges about future ESG performance are considered to be the most prone to greenwashing, followed by ESG strategy and objectives of entities, as well as ESG labels and certificates.

Last October the UK's Financial Conduct Authority (FCA) proposed set of new rules as part of plans to “clamp down” on greenwashing.

The UK regulator said that the proposed measures would include investment product sustainability labels and restrictions on how terms like ESG, green, or sustainable can be used.

The authority added that there has been growth in the number of investment products described as ‘green’ or that make wider sustainability claims, warning that "exaggerated, misleading or unsubstantiated" claims about ESG credentials can damage confidence financial products.

A study published in January found that many financial institutions are continuing to spend billions of dollars on fossil fuel companies despite committing to net zero.

Reclaim Finance, part of a group of NGOs that published the research, says that while some of the world's largest lenders have joined the Glasgow Financial Alliance for Net Zero (GFANZ) they are still pouring money into businesses that heavily produce greenhouse gases.

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