A new ruling by a regulator in the UK challenges the banking sector’s ability to make climate action claims, and suggests greater scrutiny in future of what critics claim is greenwashing of financial institutions’ contribution to climate change.

The UK’s Advertising Standards Authority (ASA) has banned two HSBC adverts as misleading consumers, stating that they promoted the bank’s green credentials without mentioning its contribution to carbon dioxide and greenhouse emissions.

The ASA received 45 complaints about HSBC posters, which were displayed at bus stops in Bristol and London in October 2021.

One featured an aerial image of waves crashing onto a shore, with text that stated the bank was looking to provide up to $1 trillion in financing and investment globally to help clients transition to net zero. The second ad showed an image of tree growth rings, with text stating HSBC helps to plant 2 million trees, locking in 1.25 million tonnes of carbon over their lifetime.

“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. We did not consider consumers would know that was the case,” the ASA said. “We concluded that the ads omitted material information and were therefore misleading.”

HSBC responded to the ban by stating that the “financing of greenhouse gas-emitting industries was required during the transition to net zero, and so their continued financing of those industries was not in conflict with the aims of a transition to net zero”.

HSBC is the thirteen largest funder of fossil fuels, according to the “banking on climate chaos” report published in 2022, and is a major lender to the oil and gas sector. It is far from an outlier in the banking sector of course, with most other major banks also major funders of fossil fuel activities.

Will the ads ban lead to less greenwashing?

The ban on HSBC ads is the first time that the regulator has banned a financial institution’s adverts over greenwashing claims. Climate action campaign groups will hope the judgement will be the first of many, and that in future businesses with links to the fossil fuel industry will not be able to obscure this when making environmental claims.

The problem is, terms such as ‘green’ and ‘sustainable’ lack universally accepted definitions, which makes it difficult to categorically disprove environmental claims made by companies. Though classifications such as Sustainable Development Goals, created by the United Nations, are widely recognised, concepts such as ‘transition fuels’ remain contested. Most rich world countries still base their net zero energy strategies on continuing to burn gas and other fossil fuels, at least in the short- to medium-term.

Yet it is a signal to the banking sector that their customers are increasingly scrutinising their green energy claims. The sector is well-aware of the reputational risks involved in being seen to greenwash, and this judgement may at least lead to greater transparency in advertising.