A greenwashing toolkit has been made available by ORX, the largest operational risk association in the world, to help international banks and insurers create a greenwashing scenario in response to the fast growing regulatory and public attention on transition risks associated to climate change.

The UK Competition and markets authority, which publishes its green claims code, discovered that 40% of green claims made in the UK could be misleading and is examining legal possibilities.

Similarly, the financial conduct authority (FCA) will impose a greenwashing rule later this year.

In October of last year, the three European supervisory authorities (ESAs) (EBA, EIOPA, and ESMA) issued a call for evidence on greenwashing.

Users of the ORX service, including some of the largest financial institutions in the world, requested the provision of this specific resource.

Less than ten of the 65 members to ORX Scenarios, ORX’s specialised scenarios service, have created a scenario for “greenwashing” to date, but the majority state that pressure to create a specialist scenario for this rapidly expanding risk area has increased significantly. 

The manual will help financial institutions create a greenwashing scenario so they can understand the causes, repercussions, and likelihood of an incident happening as well as how the risk may arise within their company.

Simon Johnson, ORX Scenarios senior manager explains:

“As the world turns its attention to the urgent threat of climate change, regulators and society are demanding greater accountability from financial organisations. This heightened scrutiny brings with it a new set of risks – including greenwashing. 

“The reality is that whilst this is a relatively new risk, what financial institutions say and do today could have repercussions ten years down the line on their reputation and threats of legal action to name but two impacts.”

The toolkit contains a booklet with practical advice on preparation, assessment, and governance.

It also includes a variety of tools, such as five ORX News digests covering greenwashing-related losses important to the financial sector, a Deep Dive on particular examples, and editorial pieces delving deeper into greenwashing and climate risk.

Johnson adds: “Each year we produce a handbook to support emerging risk areas flagged by our subscribers and this year greenwashing was identified as a priority. But a lot of financial institutions are just not at the stage yet where they are employing climate change experts and so individually, they just don’t have the data or expertise in house. This is the gap in expertise that we are hoping to fill with the collective data and insight from our subscribers and ORX team in the toolkit.”