The first impression is important. This is especially true when it comes to the question of how seriously you take environmental protection. The financial sector regularly publishes reports on the status of its sustainability goals. This is required by law, but large parts of the public also expect this transparency. An international team of researchers examined the submissions of around 500 European credit institutions in Europe and compared them with the transactions. The result: Banks that verbally boast the most about their environmental conscience primarily grant loans to companies that some circles would probably describe as “environmental pigs”.
“Our findings suggest that banks are overemphasizing their climate goals and credibility while continuing their relationships with polluting borrowers,” reads the study, titled “Glossy Green Banks“, it was a topic of the most recent ECB banking conference. In this context one would like to quote the poet Gotthold Ephraim Lessing: “People are not always what they seem, but rarely something better”, here one would only have to use the word “people Replace ” with “banks”.
“Climate protection and sustainability are often no more than well-sounding bank PR, while climate-damaging credit transactions continue unabated and make it impossible to achieve climate targets,” says Mauricio Vargas, financial and economic expert at Greenpeace, on the results of the study. Instead of glamorous but in fact ineffective sustainability reports, banks and investment companies should finally give themselves credible guidelines for dealing with climate-damaging companies, which also provide for the consistent exclusion of particularly climate-damaging business models, according to Vargas.
In order to achieve the Paris climate goals, Europe’s financial sector should support the transformation to a climate-neutral economy with loans. The rules of the EU taxonomy, which define which transactions are to be classified as “green” or “brown”, apply as a legal framework for this. “Brown” denotes corporate businesses with a high carbon footprint.
A special form of greenwashing: misleading self-praise
Politicians would like to tighten the rules for banks, the institutes would have to set aside more money as a loss buffer for environmental risks. Behind this is the fear that, for example, coal-intensive industries would no longer be competitive due to stricter regulation and that loan repayments to the banks would be jeopardized. Banks and fund companies also court private savers with the promise that their money will be invested in ecologically sound companies. But these promises are often not kept. The accusation of “greenwashing” is omnipresent, not least since the Deutsche Bank subsidiary DWS received a visit from the public prosecutor’s office. The study probably describes a special form of greenwashing in the banking sector, namely in the form of misleading self-praise.
The scientists examined the credit institutions’ sustainability reports for “green” keywords such as environmental protection and climate neutrality. This resulted in a ranking of the banks that most strongly emphasized their responsibility for sustainability. The research group reflected this result with the credit data of the institutes and found that banks with extensive environmental information primarily granted loans to non-sustainable borrowers instead of strengthening green investments.
“Close business relationships with climate-damaging companies are a danger for banks and financial stability. Dirty companies have a shaky business model if the climate goals are to be achieved,” says Magdalena Senn, officer for sustainable financial markets at the citizens’ movement Finanzwende. More transparency is needed so that banks cannot present themselves as greener than they are.