UK regulator warns other banks to fall in line after HSBC climate ads ban

UK advertising watchdog the Advertising Standards Agency (ASA) has warned banks to fall in line on their climate advertising after it banned two ads from HSBC in a precedent-setting case.

The regulator launched an investigation in response to 45 complaints about two HSBC ads that were launched in the run-up to COP26, touting the bank’s $1 trillion commitment to help its clients transition to net zero and an investment in tree planting.

The complaints, including one from Adfree Cities, alleged that the adverts gave a misleading impression of HSBC’s sustainability credentials, given its continued funding of fossil fuel companies. The bank said in its response that its climate strategy was in line with approaches recommended by GFANZ, the PRI and International Energy Agency, and that financing for GHG-emitting companies was necessary during the transition.

However, the ASA found that the adverts could potentially be misleading to consumers, who might not “understand the intricacies of transitioning to net zero” and could be led to think that HSBC was not involved in financing emissions-intensive companies. As consumers would be unaware of this, the ASA said it was “material information that was likely to affect consumers’ understanding” of the adverts and so should have been included.

The case is likely to have significant impacts on the way that banks communicate their sustainability commitments in the UK, as the ASA considers its decision to be setting a precedent. “We now expect all banks to follow this example,” a spokesperson for the regulator said.

The ASA has previously declined to investigate complaints against Barclays and Standard Chartered – both of which declined to comment – on similar grounds, on the basis that its HSBC decision would act as a precedent.

A spokesperson for HSBC’s UK business said the financial sector “has a responsibility to communicate its role in the low carbon transition to raise public awareness and engage its customers, so we will consider how best to do this as we deliver our ambitious net-zero commitments”. Responsible Investor understands that the bank is not looking to appeal the decision.

Lindsey Stewart, director of investment stewardship at Morningstar, said the decision “reflects regulators’ increasing scrutiny of financial services companies that make bold claims about their efforts to tackle climate change”. He added: “There is a clear expectation that such claims must be backed by hard evidence and a track record of meaningful climate-positive action.”

A spokesperson for the FCA, which has previously intervened with asset managers to alter ESG language in fund and website documentation, said it expects marketing from all firms to be “fair, clear and not-misleading, so that consumers understand what they’re buying”. They added that addressing the mis-selling of ESG products was a priority.

Advertising scrutiny on the rise

Corporates have been facing increasing scrutiny by watchdogs over their climate and sustainability claims, and civil society groups and NGOs are now beginning to use the same tactic in the financial sector.

Canada’s Competition Bureau opened an investigation into the Royal Bank of Canada in response to allegations – which the bank says are “unfounded” – that its statements on climate change are “materially false and misleading” given its financing for fossil fuels.

Germany’s DekaBank was taken to court last year by the Baden-Württemberg Consumer Centre, which claimed that an impact calculator for a sustainable fund on its website could potentially mislead retail investors. The bank denied the claims but agreed to remove the calculator, saying it had “no interest in conducting legal proceedings over several instances on such a socially important issue”.

Tony Burdon, CEO of sustainable finance campaign group, Make My Money Matter, said he hoped the ASA ruling “begins to turn the tide” against banks who “may hide their dangerous relationship with the fossil fuel industry through a campaign of misleading and contradictory corporate advertising”. He warned that financing fossil expansion remains unpopular with consumers.

RI understands that Make My Money Matter is itself planning a campaign targeting the UK’s largest retail banks over their financing for fossil fuel expansion.