Green Finance Briefing: Marketing sustainability efforts is a tricky game for banks
- The image banks sell to the end customer on the subject of climate change will come under close scrutiny from consumers and regulators, given their current reputation.
- Elsewhere, we look at which climate tech sectors attracted the most capital in H1 2022, and who took the lion's share in the US.
Ahead of last year's COP26 climate summit, HSBC put up some posters to advertise the bank's sustainability initiatives. Turns out this was a case of greenwashing, as the UK's regulatory agencies intervened and requested the bank to not advertise itself as environmentally responsible.
The bank was sanctioned by the UK's Advertising Standards Authority (ASA), which said that HSBC had breached a code relating to direct and promotional marketing.
The two posters in question were seen at bus stops in Bristol and London in October 2021, according to the ASA.
- The first poster featured an aerial image of waves crashing on a shore with text that stated, "Climate change doesn’t do borders. Neither do rising sea levels. That’s why HSBC is aiming to provide up to $1 trillion in financing and investment globally to help our clients transition to net zero.”
Source: The Guardian
- The second poster featured an image of tree growth rings with text that stated, "Climate change doesn’t do borders. So in the UK, we’re helping to plant 2 million trees which will lock in 1.25 million tonnes of carbon over their lifetime."
Source: The Drum
The ASA told the bank to ensure that “future marketing communications featuring environmental claims were adequately qualified and didn’t omit material information about its contribution to carbon dioxide and greenhouse-gas emissions.”
That last part is essential, because leaving out the true involvement of the bank in this matter is a form of lying by omission, and lies at the heart of why these advertisements were flagged to regulators in the first place. The advertising code requires that the basis of environmental claims is clear and that unqualified claims could mislead if they omit significant information.
Naturally, the ads generated complaints from environmental groups. They argued that the posters were misleading to consumers, because they portrayed the bank as a sustainable company. In reality, the impact of the bank's operations on the environment is much more complex.
The ASA said that, “despite the initiatives highlighted in the ads,” HSBC was “continuing to significantly finance investments in businesses and industries that emitted notable levels of carbon dioxide and other greenhouse gasses,” which consumers might not realize based on the information in the posters.
But the bank also argued its case:
“The financial sector has a responsibility to communicate its role in the low-carbon transition to raise public awareness and engage its customers, so we will consider how best to do this as we deliver our ambitious net-zero commitments,” a spokesperson for HSBC said.
The bank argues that a full withdrawal from fossil fuel financing is unrealistic given that the International Energy Agency estimated that the world will still need oil and gas in 2050. Plus, it's a member of the Glasgow Financial Alliance for Net Zero and has a net-zero emissions plan in line with the UN's Principles for Responsible Investing guidelines.
And while the ASA acknowledged all these efforts, they still took issue with the fact that the bank's financed emissions were not communicated at all to the consumer. And they are significant – financed emissions were estimated at over 65 million tons of carbon dioxide per year in oil and gas alone (so not counting heavy industry, construction, transportation, etc).
This case is an important example of what constitutes appropriate marketing on a delicate topic.
Banks need to walk this line carefully. The image they sell to the end customer on the subject of climate change will come under close scrutiny, given their current reputation.
Just look at the charts
Carbon accounting startups attracted the most funding in H1 2022, with nearly $700 million, according to a Commerz Ventures study. However, this mainly reflects the $500 million raised by EcoVadis in a Series C round. Other big sectors include climate risk management and carbon offsetting.
In the US, the four largest rounds represented 60% of total funding allocated to the sector. Pachama and NCX are both carbon offsetting platforms, Watershed is a carbon accounting SaaS platform, and FlowCarbon aims to tokenize carbon credits.
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