Top

Published in:

2023 | OriginalPaper | Chapter

7. Is All That Glitters That “Green”? An Empirical Investigation of the Magnitude of Greenwashing in Banking and Its Determinants

Authors : Gimede Gigante, Priscilla Greggio, Andrea Cerri

Published in: New Challenges for the Banking Industry

Publisher: Springer Nature Switzerland

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

This chapter examines banks’ “green finance” and greenwashing claims. Firstly, a new methodology is introduced to quantify the magnitude of greenwashing for a cross-country dataset in the period 2016–2020. Then, regression analysis is performed to test whether firms, country and temporal-level factors influence banks’ greenwashing practices. The results suggest that big, more profitable banks located in advanced economies are more likely to engage in greenwashing, and that this behavior has reduced over the selected time period. Considering that the adherence to voluntary disclosing initiatives does not significantly mitigate greenwashing, the research confirms the urgent need for stringent surveillance by a global governing body to check the reliability of banks’ sustainable data disclosed. It also points out that banks’ sustainable finance commitments and claims of “net-zero by 2050” cannot be taken seriously if they are considered as a license to avoid taking immediate action on their fossil fuel investments.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

previous chapter Firm Pollution and Reputational Risk: Where Do We Stand?

next chapter Sovereign Green Bonds in Europe: Are They Effective in Supporting the Green Transition?

Available only for authorised users

https://www.wri.org/finance/banks-sustainable-finance-commitments/.

https://www.wri.org/research/unpacking-green-targets-framework-interpreting-private-sector-banks-sustainable-finance.

Available at https://www.wri.org/finance/banks-sustainable-finance-commitments/.

See the note of Table 7.13 in the Appendix for a detailed determination of the rationale of selection.

As defined by the S&P Global Market Intelligence ranking, April 2020 (RAN et al., 2021).

Available at https://www.ran.org/bankingonclimatechaos2021/.

Ahlström, H., Monciardini, D. (2021). The Regulatory Dynamics of Sustainable Finance: Paradoxical Success and Limitations of EU Reforms. Journal of Business Ethics. https://doi.org/10.1007/s10551-021-04763-xCrossRef

Baldini, M., Maso, L., Liberatore, G., Mazzi, F., Terzani, S. (2016). Role of Country- and Firm-Level Determinants in Environmental, Social, and Governance Disclosure. Journal of Business Ethics, 150(1), 79–98. https://doi.org/10.1007/s10551-016-3139-1CrossRef

Belkaoui, A., Karpik, P. (1989). Determinants of the Corporate Decision to Disclose Social Information. Accounting, Auditing & Accountability Journal, 2(1). https://doi.org/10.1108/09513578910132240

Berensmann, K., Lindenberg, N. (November, 2016). Green Finance: Actors, Challenges and Policy Recommendations. German Development Institute/Deutsches Institut für Entwicklungspolitik (DIE), Briefing Paper 23/2016, Available at SSRN: https://ssrn.com/abstract=2881922

Berrou, R., Ciampoli, N., Marini, V. (2019). Defining Green Finance: Existing Standards and Main Challenges. In Migliorelli, M. & Dessertine, P. (eds.). The rise of Green Finance in Europe (31–51). Palgrave studies in Impact Finance. https://doi.org/10.1007/978-3-030-22510-0_2

Bhasin, M.L., Makarov, R.R., Orazalin, N.S. (2012). Determinants of Voluntary Disclosure in the Banking Sector: An Empirical Study. International Journal of Contemporary Business Studies (3), 60–71. Available at SSRN: https://ssrn.com/abstract=2676501

Breton, G., Côté, L. (2006), Profit and the Legitimacy of the Canadian Banking Industry. Accounting, Auditing & Accountability Journal, 19(4), 512–539. https://doi.org/10.1108/09513570610679119CrossRef

Carè, R. (2018). Sustainable Banking. Issues and Challenges. 1st ed. Palgrave Pivot. Available at: https://doi.org/10.1007/978-3-319-73389-0

Carnevale, C., Mazzuca, M. (2014). Sustainability Report and Bank Valuation: Evidence from European Stock Markets. Business Ethics: A European Review, 23(1), 69–90. https://doi.org/10.1111/beer.12038CrossRef

Chapple, W., Moon, J. (2005). Corporate Social Responsibility (CSP) in Asia: A Seven-Country Study of CSP Web Site Reporting. Business & Society, 44(4), 415–441. https://doi.org/10.1177/0007650305281658CrossRef

Cheng, B., Ioannou, I., Serafeim, G. (2014). Corporate Social Responsibility and Access to Finance. Strategic Management Journal, 35, 1–23. https://doi.org/10.1002/smj.2131

Cowen, S.S., Ferreri, L.B., Parker, L.D. (1987). Determinants of Corporate Social Responsibility Disclosure: An Application of Stakeholder Theory. Accounting, Organizations and Society, 12(2), 111–122. https://doi.org/10.1016/0361-3682(87)90001-8CrossRef

Crespi, F., Migliavacca, M. (2020). The Determinants of ESG Rating in the Financial Industry: The Same Old Story or a Different Tale? Sustainability, 12(16), 6398. https://doi.org/10.3390/su12166398CrossRef

Del Bosco, B., Misani, N. (2016). The Effects of Cross-Listing on the Environmental, Social and Governance Performance of Firms. Journal of World Business, 51(6), 977–990. https://doi.org/10.1016/j.jwb.2016.08.002CrossRef

Delmas, M.A., Burbano, V.C. (2011). The Drivers of Greenwashing. California Management Review, 54(1), 64–87. https://doi.org/10.1525/cmr.2011.54.1.64CrossRef

Doyle, M.T. (2018). Ratings That Don’t Rate: The Subjective World of ESG Ratings Agencies. American Council for Capital Formation. Available at: https://corpgov.law.harvard.edu/2018/08/07/ratings-that-dont-rate-the-subjective-world-of-esg-ratings-agencies/

El-Halaby, S., Hussainey, K. (2015). The Determinants of Social Accountability Disclosure: Evidence from Islamic Banks Around the World. International Journal of Business, 20, 203–223. Available at: https://www.researchgate.net/profile/Sherif-El-Halaby/publication/283522222_The_determinants_of_social_accountability_disclosure_Evidence_from_islamic_banks_around_the_world/links/5af151edaca272bf4255b486/The-determinants-of-social-accountability-disclosure-Evidence-from-islamic-banks-around-the-world.pdf

Finger, M., Gavious, I., Manos, R. (2018). Environmental Risk Management and Financial Performance in the Banking Industry: A Cross-Country Comparison. Journal of International Financial Markets Institutions and Money, 52, 240–261. https://doi.org/10.1016/j.intfin.2017.09.019CrossRef

Gamerschlag, R., Möller, K., Verbeeten, F. (2011). Determinants of Voluntary CSR Disclosure: Empirical Evidence from Germany. Review of Managerial Science, 5(2–3), 233–262. https://doi.org/10.1007/s11846-010-0052-3CrossRef

Ghitti, M., Gianfrate, G., Palma, L. (2020). The Agency of Greenwashing. https://doi.org/10.2139/ssrn.3629608

Gnyawali, D.F. (1996). Corporate Social Performance: An International Perspective. Advances in International Comparative Management, 11, 251–273.

Gray, R., Javad, M., Power, P.M., Sinclairal, C.D. (2001). Social and Environmental Disclosure and Corporate Characteristics: A Research Note and Extension. Journal of Business Finance and Accounting, 28(3), 327–356. https://doi.org/10.1111/1468-5957.00376CrossRef

Hahn, J. (March 24, 2021). Many Banks Committing to Climate Goals Are Engaging in Greenwashing. Sierra. Available at: https://www.sierraclub.org/sierra/many-banks-committing-climate-goals-are-engaging-greenwashing-banking-on-climate-chaos

Hartmann, J., Uhlenbruck, K. (2015). National Institutional Antecedents to Corporate Environmental Performance. Journal of World Business, 50, 729–741. https://doi.org/10.1016/j.jwb.2015.02.001CrossRef

Ioannou, I., Serafeim, G. (2012). What Drives Corporate Social Performance? The Role of Nation-Level Institutions. Journal of International Business Studies, 43(9), 834–864. https://doi.org/10.1057/jibs.2012.26CrossRef

Khan, H.Z., Bose, S., Mollik, A.T., Harun, H. (2020). ‘Green Washing’ or ‘Authentic Effort’? An Empirical Investigation of the Quality of Sustainability Reporting by Banks. Accounting, Auditing & Accountability Journal. https://doi.org/10.1108/AAAJ-01-2018-3330

Kim, E.H., Lyon, T.P. (2011). Strategic Environmental Disclosure: Evidence from the DOE’s Voluntary Greenhouse Gas Registry. Journal of Environmental Economics and Management, 61(3), 311–326. https://doi.org/10.1016/j.jeem.2010.11.001CrossRef

Kim, E.H., Lyon, T.P. (2015). Greenwash vs. Brownwash: Exaggeration and Undue Modesty in Corporate Sustainability Disclosure. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2546497

Kotsantonis, S., Bufalari, V. (2019). Do Sustainable Banks Outperform? Deloitte. https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/financial-services/Banking/lu-do-sustainable-banks-outperform-driving-value-creation-through-ESG-practices-report-digital.pdf

La Torre, M., Leo, S., Panetta, I.C. (2020). Banks and Environmental, Social and Governance Disclosure. Follow the Market or the Authorities? Corporate Social Responsibility and Environmental Management (2021), 1–15. https://doi.org/10.1002/csr.2132CrossRef

Lyon, T.P., Maxwell, J.W. (2011). Greenwash: Corporate Environmental Disclosure Under Threat of Audit. Journal of Economics and Management Strategy, 20(1), 3–41. https://doi.org/10.1111/j.1530-9134.2010.00282.xCrossRef

Lyon, T.P., Montgomery, A.W. (2013). Tweetjacked: The Impact of Social Media on Corporate Greenwash. Journal of Business Ethics, 118(4), 747–757. https://doi.org/10.1007/s10551-013-1958-x

Lyon, T.P., Montgomery, A.W. (2015). The Means and End of Greenwashing. Organization & Environment, 28(2), 223–249. https://doi.org/10.1177/1086026615575332CrossRef

Marchant, C. (2020). Are Banks Really Going Green, or Is It Just…. Environmental Finance, Winter 2020. Available at: https://www.environmental-finance.com/assets/files/magazines/ef-winter-2020.pdf

Marquis, C., Toffel, M.W., Bird, Y. (2016). Scrutiny, Norms and Selective Disclosure: A Global Study of Greenwashing. Organization Science, 27(2), 483–504. https://doi.org/10.2139/ssrn.1836472CrossRef

Migliorelli, M. (2021). What Do We Mean by Sustainable Finance? Assessing Existing Frameworks and Policy Risks. Sustainability, 13(2), 975. MDPI AG. https://doi.org/10.3390/su13020975

Migliorelli, M., Dessertine, P. (2019). Green Finance Today: Summary and Concluding Remarks. In Migliorelli, M. & Dessertine, P. (eds.). The rise of Green Finance in Europe (263–270). Palgrave studies in Impact Finance. https://doi.org/10.1007/978-3-030-22510-0_2

Nayak, B.K. (2010). Understanding the Relevance of Sample Size Calculation. Indian Journal of Ophthalmology, 58(6): 469–470. https://doi.org/10.4103/0301-4738.71673CrossRef

Neumayer, E., Plümper, T. (2017). Robustness Tests for Quantitative Research. Cambridge University Press. https://books.google.it/books?id=BHE2DwAAQBAJ&dq=is+it+ok+if+robustness+checks+same+sign+no+significance&hl=it

Pérez, M.E.S. (2016). SEBI Index: Measuring the Commitment to the Principles of Social Banking. Universidad de Extremadura. https://doi.org/10.1016/j.cya.2017.06.015CrossRef

Pinchot, A., Christianson, G. (October 3, 2019). How Are Banks Doing on Sustainable Finance Commitments? Not Good Enough. World Resources Institute. Available at: https://www.wri.org/insights/how-are-banks-doing-sustainable-finance-commitments-not-good-enough

Pinchot, A. Sato, I., Christianson, G., Zhou, L. (2019). Unpacking Green Targets: A Framework for Interpreting Private-Sector Banks’ Sustainable Finance Commitments. Technical Note. Washington, DC: World Resources Institute. Available online at: https://www.wri.org/research/unpacking-green-targets-framework-interpreting-private-sector-banks-sustainable-finance

Rainforest Action Network. (2021). Banking on Climate Chaos. Rainforest Action Network- (RAN)-BankTrack-Indigenous Environmental Network (IEN)-Oil Change International (OCI)-Reclaim Finance-Sierra Club. Available at: https://www.ran.org/bankingonclimatechaos2021/

Rees, W., Rodionova, T. (2015). The Influence of Family Ownership on Corporate Social Responsibility: an International Analysis of Publicly Listed Companies. Corporate Governance International Review, 23, 184–202. https://doi.org/10.1111/corg.12086CrossRef

Relaño, F. (2011). Maximizing Social Return in the Banking Sector. Corporate Governance, 11(3), 274-284. https://doi.org/10.1108/14720701111138698CrossRef

Reuters, T. (2017). Thomson Reuters ESG Scores. Available at: https://www.esade.edu/itemsweb/biblioteca/bbdd/inbbdd/archivos/Thomson_Reuters_ESG_Scores.pdf

Tamimi, N., Sebastianelli, R. (2017). Transparency Among S&P 500 Companies: An Analysis of ESG Disclosure Scores. Management Decision, 55(8), 1660–1680. https://doi.org/10.1108/MD-01-2017-0018CrossRef

Valls Martínez, M.D.C., Cruz Rambaud, S., Parra Oller, I.M. (2020). Sustainable and Conventional Banking in Europe. PLoS ONE, 15(2), e0229420. https://doi.org/10.1371/journal.pone.0229420CrossRef

Weber, C., Thomä, J., Dupre, S., Fischer, R., Cummis, C., Patel, S. (2017). Exploring Metrics to Measure the Climate Progress of Banks. Washington, DC: World Resources Institute, UNEP Finance Initiative, 2 Degrees Investing Initiative. Available at: https://wedocs.unep.org/bitstream/handle/20.500.11822/33118/EMMCP.pdf?sequence=1&isAllowed=y

Yu, E.P, Luu, B.V., Chen, C.H. (2020). Greenwashing in Environmental, Social and Governance Disclosures. Research in International Business and Finance, Elsevier, 52(C). https://doi.org/10.1016/j.ribaf.2020.101192

Title: Is All That Glitters That “Green”? An Empirical Investigation of the Magnitude of Greenwashing in Banking and Its Determinants
Authors: Gimede Gigante
Priscilla Greggio
Andrea Cerri
Publisher: Springer Nature Switzerland
Book: New Challenges for the Banking Industry
Print ISBN: 978-3-031-32930-2

Electronic ISBN: 978-3-031-32931-9

Copyright Year: 2023
DOI: https://doi.org/10.1007/978-3-031-32931-9_7