The number of cases of greenwashing by banks and financial services companies soared globally by 70% in the past 12 months when compared to the previous 12 months, a report on Tuesday showed.

European financial institutions accounted for most instances and much of the greenwashing involved claims about fossil fuels.

Environmental, social and governance (ESG) data firm RepRisk recorded 148 cases from the banking and financial services industry globally in the 12 months to the end of September 2023, up from 86 during the previous 12 months.

Of the 148 cases, 106 were by European financial institutions.

Greenwashing involves an organisation making misleading sustainability related claims to investors or consumers, usually to boost its reputation and bottom line.

"Over 50% of these climate-specific greenwashing risk incidents either mentioned fossil fuels or linked a financial institution to an oil and gas company. These incidents are not happening in isolation and regulators are increasingly aware of the scale of the problem," RepRisk said.

European Union watchdogs said in June that banks, insurers and investment firms across the bloc had made "misleading claims" about their sustainability credentials to investors.

The banking and financial services industry is second only to oil and gas for the number of greenwashing incidents, RepRisk said.

The data firm found that greenwashing more broadly was on the rise.

One in every four climate-related ESG risk incidents was linked to greenwashing, an increase from one in five last year, it said, while it also found that one in three companies tied to greenwashing was also embroiled in so-called "social washing."

It defined social washing as companies presenting themselves positively by "obscuring an underlying social issue" – such as human rights abuses and corporate complicity, or impacts on communities – to protect their reputation and financial performance.

"Misleading communication around environmental and social topics not only impedes progress towards collective goals, but also damages trust with consumers and investors," RepRisk wrote in its latest report.