Green Finance Or Greenwashing? - The Use Of Environmental Claims In Financial Markets In The Light Of Recent Decisions Of The Advertising Board Of Türkiye

In recent years, the concepts of sustainability and environmental sensitivity have become an important issue on the agenda of the financial sector as well as other sectors.

In this context, we see banks and financial institutions publishing advertisements with environmental claims such as "green housing loans" and "green vehicle loans" to encourage environmentally friendly projects.

While it is important that the financial sector closely and successfully follows the global agenda items, it is of utmost importance that these claims reflect the truth and do not mislead consumers. As a matter of fact, increased regulatory oversight and consumer sensitivity require institutions operating in this field to adopt a more careful and systematic approach.

Recently, the decisions taken by the Advertising Board of Türkiye ("Board") at its meeting dated January 16, 2025 and numbered 353 were published, and among these decisions, one in particular contains remarkable findings regarding the use of environmental claims in financial markets. It should be noted that although the Board imposed "suspension of advertisements" on the financial actors in these decisions, administrative fines may also be imposed in case of repeated violations. As of 2025, these fines have been increased and the upper limit has been raised to 31,808,530 TRY.

In order to better understand the approach of the Board and what financial institutions should pay attention to in their internal processes, in this article, we will first discuss the concepts of i) environmental claims and ii) greenwashing and their examples in the world; and then we will touch upon the prominent regulations in this field in our country and what the actors in the financial sector should pay attention to in light of the Board's decisions.

What is an Environmental Claim?

Within the scope of the Guidelines on Advertisements Containing Environmental Declarations published by the Board, "environmental claim" is defined as a statement or visual indicating that a good or service provides environmental benefits or does not have a negative impact on the environment in relation to its component, production, market supply process, use or disposal process within the scope of commercial advertisement or commercial practice.

In short, an environmental claim refers to the commitments or claims that a company or organization makes to the public about the environmental impact of the products or services it offers. These claims may include topics such as reducing carbon footprint, use of recyclable materials, energy efficiency, and transition to renewable energy.

In the financial sector, environmental claims are often manifested through practices such as green loans, sustainable investment funds or carbon neutral financing models. However, it is crucial that these claims reflect the truth and do not mislead consumers.

What is Greenwashing?

Greenwashing is when a company presents itself as an environmentally conscious brand when it is not. In other words, the environmental impact of products or services are made to appear more favorable than they actually are, or completely misleading claims are made. This means the use of "environmental claims" in a false or unsubstantiated manner.

The term greenwashing was first used in 1986 by environmentalist writer Jay Westerveld. After seeing the message "protect the environment by reusing your towels" in a hotel in Fiji, Westerveld realized that the hotel was actually trying to reduce laundry costs rather than protecting the environment and coined the term "greenwashing" to describe such misleading environmental claims.

Just one year after the publication of Westerveld's article, the famous People Do campaign of the American energy company Chevron emerged as a pioneer of other oil companies' greenwashing campaigns. In this advertisement, which is considered one of the best examples of corporate greenwashing, Chevron emphasizes its environmental achievements with images of nature without mentioning its carbon footprint, thereby building trust with consumers in a misleading way.

Greenwashing in Financial Markets: DWS and HSBC examples

Greenwashing is much more than an untrue statement that a package is recyclable, and in fact can sometimes lead to sanctions against advertisers in some abstract circumstances.

Indeed, when we consider financial markets, the following examples may lead to the imposition of administrative fines and/or suspension of advertisements against financial actors who advertise as they constitute "greenwashing":

• Loans offered with the promise of "green loans" have repayment terms and interest rates that are no different from standard loans.
• Supporting sustainable investments while at the same time financing environmentally harmful projects.
• Banks claim to be carbon neutral but carbon offset mechanisms are not transparent.

Examples like the above have also been observed in financial products that have made waves around the world. For example, in 2021, Deutsche Bank's asset management unit DWS came under investigation in the US and Germany for making misleading statements that its investment funds were sustainable. It turned out that the funds the company presented as "environmentally friendly" did not actually meet the established sustainability criteria.

On the other hand, the UK Advertising Standards Authority (ASA) banned HSBC's advertisements on tree-planting campaigns and combating climate change in 2022, deeming them "misleading". The bank was accused of hiding its financing of fossil fuels while highlighting its investments in sustainable projects.

What are some of the legal regulations on greenwashing?

Today, as a result of years of awareness, greenwashing is now considered within the framework of a company's/institution's environmental, social and governance (Enviromental, Social Corporate Governance - "ESG") requirements, and a series of compliance programs known as ESG rules, both in our country and in the European Union, have become mandatory for some companies.

For example, in December 2022, the European Union's Corporate Sustainability Reporting Directive ("CSRD") entered into force in order to achieve the targets set by the European Green Deal, which includes various obligations such as banning vehicles running on fossil fuels from 2035 or imposing additional carbon fees on imported products.

In Türkiye, in parallel with this regulation in the EU, with the Decision on the Scope of Implementation of the Turkish Sustainability Reporting Standards ("TSRS") published by the Public Oversight, Accounting and Auditing Standards Authority, it has become mandatory for companies that exceed certain thresholds or have certain roles to make "Sustainability Reporting" as of 01.01.2024.

In addition, the Guideline on Advertisements Containing Environmental Declarations ("Guideline"), which entered into force on 13.12.2022 in line with the decision taken by the Advertising Board operating under the Ministry of Trade in Türkiye, is a pioneering guide in this field.

The Guidelines explain how environmental declarations can and cannot be used, set out the minimum requirements for certificates to be obtained, and provide examples of what constitutes unlawful practices.

The Guidelines also require advertisers making an environmental statement or claim to substantiate it in accordance with the requirements in the Guidelines (e.g. a publicly available and verifiable strategy document).

What do the latest decisions of the Advertising Board say?

During the monthly meetings held by the Board, the lawfulness of the advertisements and campaigns examined are evaluated on the basis of the provisions of the Guidelines mentioned above.

In this context, it is important that advertisers comply with the provisions of the Guidelines in their advertisements and campaigns and provide accurate information to consumers, especially in terms of environmental claims, which have recently been on the radar of the Board.

As a matter of fact, especially in the examinations made at the meeting of the Board dated January 16, 2025 and numbered 353 it is found that;

• In loan advertisements that use expressions such as "discounted", "advantageous", "favorable" and "attractive" interest rates, clear information about these advantages is not included in the main advertising message,
• Loans emphasizing environmental sensitivity are no different from standard loans, and,
• Environmental actions are portrayed as having a greater impact than they actually do.

As a result of these findings, the Board decided to impose suspensions of advertisements of 10 banks and to inform the unions and non-governmental organizations operating in the sector.

In line with these decisions of the Board, in order to ensure that consumers are fully and accurately informed, the following points should be taken into consideration:

• When stating the interest rate on loans, all cost elements, not just interest, should be clearly disclosed.
• The additional costs such as "participation fees" in loans with campaigns should not be concealed.
• Annual cost rate information of the loans should be clearly stated in the main message of the advertisement.

We have compiled some of these decisions below made by the Board in the last meeting, which are particularly relevant for financial actors:

So what should financial actors pay attention to?

The above-mentioned decisions of the Board are an important roadmap for financial actors to make environmental claims.

To make a general assessment in accordance with both the decisions of the Advertising Board and the legislation in force, it can be said that financial actors should pay attention to the following issues in order to ensure that environmental claims are communicated to consumers in an accurate and transparent manner.

• Real and measurable commitments should be made: Banks and other financial institutions should measure the environmental impact of all financial products and services they offer, such as loans, financing, credit cards, etc., and publicly disclose this data before making environmental claims. When sharing the relevant measurements and results, the minimum scientific requirements set out in the Guidelines should also be fulfilled.
• Clear and accurate information should be provided: In particular, the loan advantages and conditions offered under the name of "green housing loan" and "green vehicle loan" should be clearly explained. If it is not possible to provide such a detailed explanation on the page where the loan is announced, consumers should be directed to the page where a detailed explanation is provided.
• An independent verification mechanism should be in place: Verification of environmental commitments and claims through independent audits will increase consumer confidence. In particular, it should be noted that under Article 5/8 of the Guidelines , statements/commitments on the intended future environmental impacts of goods and services can only be used in advertising if they are included in a publicly available and verifiable strategy document.
• Misleading claims should be avoided: Instead of general and umbrella terms such as "environmentally friendly" or "green", the specific environmental contributions of products should be detailed with certification and test results from institutions such as scientific organizations or universities. Phrases such as "eco-friendly", "ecological", "green", "sustainable", etc. will be ambiguous and misunderstood by consumers, and it will be difficult for advertisers to prove that the requirements of these terms are fulfilled.

It should not be forgotten that environmental sustainability and providing accurate information to consumers in this context is not only a marketing tool, but also the responsibility of the financial sector.

Accurate and transparent environmental claims will both protect consumer rights and strengthen the long-term reputation of financial institutions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.