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Banks face legal risks if they don’t stick to climate goals: ECB

climate greenwashing banks

(Reuters) — Banks face the risk of being sued if they don’t stick to their climate goals or try “greenwashing” their image, a top European Central Bank supervisor said on Thursday.

Major Wall Street banks have threatened to leave United Nations climate envoy Mark Carney’s financial alliance because they fear its strict requirements could expose them to lawsuits, the Financial Times reported on Wednesday. 

ECB supervisor Anneli Tuominen did not make any reference to Carney’s Glasgow Financial Alliance to Net Zero, but said banks faced risks if they don't keep climate pledges.

“If banks do not meet the targets they have announced or follow the climate strategy they have communicated, they expose themselves to litigation and reputational risks,” Ms. Tuominen told a conference in Frankfurt.

She added that obligations under the international Paris Agreement on climate may be enforced by legal means if banks fail to respect them voluntarily.

Climate-related lawsuits are on the rise, according to the Network for Greening the Financial System. In one landmark case last year, oil major Royal Dutch Shell was ordered by a court to cut its greenhouse gas emissions by 45% by 2030.

Ms. Tuominen also warned against “greenwashing” - or making exaggerated and misleading claims that suggest a bank is a steward of the environment without real action.

“Banks can be accused of greenwashing if the information they disclose is misleading,” she said. “The threat of legal cases following greenwashing must be taken seriously, and banks should take care to ensure that the information on their sustainable products is correct.”

The Glasgow Financial Alliance for Net Zero, set up in 2021 by former Bank of England governor Mr. Carney, is a coalition of assets managers, banks and insurance firms representing $130 trillion in assets directed toward tackling climate change.