The eurozone banks that publicise their environmental policies more that place more emphasis on their green goals in their reports to investors are precisely those that, in practice, lend less to the green and more to the brown industry, i.e. high-carbon companies. A kind of greenwashing, as reported from Italian newspapaer Sole24Ore.
This ‘serious discrepancy’ between saying and doing, on strategies and objectives for the environment, with regard to the top 100 plus banking groups in the eurozone, is denounced by a blog published on the ECB website this morning.
The authors of the paper are researchers (Mariassunta Giannetti, Martina Jasova, Maria Loumioti, Caterina Mendicino) and the result of their investigation does not reflect the official opinion of the ECB. However, by publishing its contents, the ECB did not disassociate itself from this research but rather put the megaphone to the main messages, issuing a warning to the banks. As if to say: be careful, because here at the ECB on climate nothing escapes your notice.
A worrying disconnect between saying and doing
In essence, the blog warns: ‘The stark revelation of our research lies in the disconnect between the way banks talk about environmental intentions and the way they lend’.
The survey brings to light a practice associated with greenwashing: the banks that portray themselves as more aware of environmental challenges are also those that lend the most to the brown industry, the one producing CO2
. And they do so by exploiting the opacity of information. Banks increasingly communicate about environmental and green policies but this does not mean that they lend more to greener companies. Looking at lending data, the authors found that banks that communicate more about environmental issues tend to specialise in lending to brown industries.
“This is consistent with the hypothesis that banks with greater exposure to high-carbon industries are under greater pressure to disclose their environmental strategies and decarbonisation plans. The amount of environmental disclosure is also correlated with higher environmental ratings provided by external rating agencies’.
Banks that make high disclosure of their environmental policies therefore extend more credit to brown industries:
“This is especially true for new loans to small borrowers, which are not observable by investors and stakeholders. The lending policies of banks with higher environmental disclosure would not indicate greenwashing if these banks financed the transition of brown borrowers to low-emission technologies. But we find that companies with higher carbon emissions that borrow from banks with broader environmental disclosures do not end up lowering their emissions or committing to voluntary emissions targets. Surprisingly, these banks also show a reluctance to lend to young companies in brown industries – companies that could potentially drive innovation in cleaner technologies,”
So the banks that make the most ‘green’ in the end are those that lend the most to companies that pollute, under the guise of making them pollute less, but then do not control and thus allow the survival, profitable, of these companies.
The banks continue to take rich profits from these loans and it could not be otherwise. Green is increasingly becoming an impocrisy, as similar research on US banks has revealed.