The number of instances of greenwashing by banks and financial services companies around the world rose 70% in the past 12 months from the previous 12 months, a report on Tuesday showed.
European financial institutions accounted for most of those instances, and much of the greenwashing involved claims about fossil fuels.
Environmental, social and governance (ESG) data firm RepRisk recorded 148 cases from the banking and financial services industry globally in the 12 months to the end of September 2023, up from 86 during the previous 12 months.
Greenwashing involves an organisation making misleading sustainability related claims to investors or consumers, usually to boost its reputation and bottom line.
Regulators want to stamp out greenwashing to boost consumer and investor confidence and help encourage more cash towards sustainable investments, although there is no legal definition of what greenwashing is yet.
It looks for such communication by analysing public sources of information and stakeholders, rather than the information a company has published. For example, research findings revealing that a company has overstated the impact of an initiative would be tallied as a case of greenwashing.
UK Finance, which represents the banking and finance industry, and the European Banking Federation, did not immediately respond to requests for comment on the increasing number of greenwashing incidents found by RepRisk.
European Union watchdogs in June put forward a "common high-level understanding" of greenwashing and said that banks, insurers and investment firms across the bloc had made "misleading claims" about their sustainability credentials to investors.
The banking and financial services industry is second only to oil and gas for the number of greenwashing incidents, RepRisk said.
The data firm found that greenwashing more broadly was on the rise.
One in every four climate-related ESG risk incidents was linked to greenwashing, an increase from one in five last year, it said, while it also found that one in three companies tied to greenwashing was also embroiled in so-called "social washing".
It defined social washing as companies presenting themselves positively by "obscuring an underlying social issue" - such as human rights abuses and corporate complicity, or impacts on communities - to protect their reputation and financial performance.
"Misleading communication around environmental and social topics not only impedes progress towards collective goals, but also damages trust with consumers and investors," RepRisk wrote in its latest report.
