Banks Claim Green Credentials While Funding High-Carbon Projects

That's not just a cosmetic problem. According to the review, these practices let institutions satisfy investor and regulatory expectations without actually changing their financing activities. The claims change; the carbon-intensive lending continues.

Why does this matter beyond the banking sector?

Banks and investment managers sit at the top of the money pipeline. Their decisions determine which economic activities get funded and which don't. If greenwashing is widespread in that sector, the study's authors note, it undercuts the assumption that financial markets are steering the economy toward a more sustainable future.

The risk cuts two ways. Misleading claims can direct investment toward activities that undermine emissions reduction efforts. They also weaken confidence in sustainable finance as a whole—meaning genuinely green projects may struggle to attract capital once investors stop trusting the labels.

How can greenwashing be reduced?

The review doesn't stop at diagnosis. Its authors call for two concrete fixes:

• Standardized environmental performance measures, so institutions can't pick and choose which metrics to report.
• Independent verification of sustainability disclosures, so claims get checked by outsiders rather than graded by the institutions themselves.

The logic is straightforward. If every bank reports the same carbon metrics in the same way, and third parties audit the numbers, selective reporting becomes much harder to pull off.

How solid is the evidence?

Some caution is warranted. This is a review of existing literature, not a new audit of individual banks. It synthesizes findings across ten years of published research rather than naming specific institutions or quantifying the scale of greenwashing with a single figure. And the underlying studies vary in method and scope, which is typical for a systematic review of this kind.

Still, the pattern the authors identified persisted across a decade of research. That consistency is itself the finding: the gap between sustainability claims and actual environmental performance in finance isn't a one-off scandal. It's a structural feature, at least as the published record shows it.

The paper, from a team led by Manabhanjan Sahu, carries the DOI 10.1504/ijmfa.2026.157436 and was published by Inderscience in 2026. If regulators act on its recommendations, standardized measures and independent verification could become the next front in the fight over who gets to call themselves green.