While happily bragging about their green finance targets, Lloyds Banking Group PLC (LSE:LLOY), Barclays PLC (LSE:BARC) and HSBC Holdings PLC (LSE:HSBA) are among Europe’s largest banks accused of failing to be fully transparent in how they report on their results.
All 20 of the largest banks across the UK and European Union could be open to the allegation of greenwashing, according to a report by non-profit organisation ShareAction, as it the "opaque" nature of their targets makes it "impossible to tell" how committed they are to transitioning from investing in fossil fuels to future green energy solutions.
Examining the statements and reports of the 20 biggest lenders, also including NatWest Group PLC (LSE:NWG), Standard Chartered PLC (LSE:STAN), Santander, UBS, Deutsche Bank and BNP Paribas, ShareAction's researchers that there was an overwhelming "lack of clarity".
All 20, apart from UBS, have set at least one target for financing 'green' activities, which the research defined as any finance given towards climate mitigation and adaptation, which might range from helping fund the purchase of a solar power plant or financing with an interest rate linked to an emissions reduction target for the borrower.
Only four – Barclays, BNP, ING, and Intesa Sanpaolo – publish partial information on how they have calculated some of their green finance targets, while most banks were found to include products in their targets which do not lead to more funding going toward green activities.
For example, Standard Chartered claim to be meeting their target by advising clients on mergers and acquisitions.
Banks widely "apply double standards" to reducing emissions and increasing green financing, the report found, with almost no banks (Barclays the exception) accounting for their capital markets activities in their decarbonisation targets, but almost all banks include capital markets facilitation in their green finance targets.
While Barclays does include capital markets in its emissions reduction targets, it only counts 33% of its share in a deal, whereas it counts 100% per cent of its share in a deal when it goes toward its green finance target.
Good intentions or PR marketing is one thing, but just 35% of banks measured the real impact of their financing, such as the level of renewable energy capacity installed through funding, and reported even less on whether their green financing was for new assets or already existing projects.
In one example, HSBC reported 77% of its 2022 green bond allocation was to already existing projects.
None of Barclays, HSBC, Lloyds, NatWest were found to report on impact and 'additionally'.
“Banks widely promote their green credentials to their customers and shareholders. However there is a structural lack of transparency on what their green finance activities achieve," said Xavier Lerin, senior research manager at ShareAction.
"It remains unclear from what the banks themselves are reporting and in the targets they are setting whether they are actually providing the finance required to transition our economy and mitigate against the most damaging consequences of climate change.
"Banks must put their money where their mouth is and set clearly scientific targets that illustrate their working, or the public and investors will be left in the dark about how meaningful the contributions they are making to preventing the worst impacts of climate change and adapting our economy for a low carbon future.”
The report calls on policymakers and standard-setting bodies to establish standards that tackle greenwashing and ensure banks are properly measuring the impact of their financing.