October 13, 2022 at 5:00 am ET
Most Americans Believe Banks Are Sincere About Social Equity Efforts. ESG Claims Are Another Story
61% of U.S. adults think financial institutions are genuine in their attempts to serve all customers fairly, while 53% say financial companies’ environmental and social efforts are not sincere
As investors and executives choose sides in the debate over environmental, social and governance practices, a new Morning Consult survey finds that the public is skeptical of financial institutions’ efforts to operate in an environmentally and socially conscious manner but credulous about their attempts to serve customers equitably regardless of race, ethnicity or income.
The Public Gives Financial Institutions the Benefit of the Doubt on Their Equity Efforts, but Not Their ESG Practices
Respondents were asked whether they agree or disagree that financial institutions in general are making genuine efforts on the following:
Survey conducted Sept. 30-Oct. 2, 2022, among a representative sample of 2,211 U.S. adults, with an unweighted margin of error of +/-2 percentage points. Figures may not add up to 100% due to rounding.
U.S. adults are more likely to believe banks’ equity efforts are genuine compared to their ESG work
- When it comes to financial institutions’ efforts around ESG practices, just under half of U.S. adults (47%) said they believe the companies are genuine in their efforts.
- Americans had a slightly more positive outlook when it came to financial firms’ efforts to operate equitably, with 61% saying they think the firms are sincere in their efforts to serve all customers regardless of race, ethnicity or income.
- When asked if they trusted certain types of financial services companies to do what is right, 75% of adults said they had “a lot” or “some” trust in credit unions, followed by brick-and-mortar banks (70%), credit card companies (63%), digital or online-only banks (61%) and investment management firms (57%).
- Respondents were undecided on whether they think the financial firms that they personally use participate in greenwashing: 45% said they don’t know or have no opinion on the matter, while 25% said they do believe their banks or financial institutions engage in greenwashing and 30% said they do not.
Researchers question if banks are actually “walking the walk”
Regulators have made headlines with their efforts to stem the tide of what they see as greenwashing by banks, as Deutsche Bank AG, Goldman Sachs Group Inc. and Bank of New York Mellon Corp. have all been dogged by allegations of overselling their environmental, social and governance claims. But as regulators crack down on greenwashing, another issue has emerged: social washing.
Long before the consternation over “woke” or ESG investing saturated financial headlines, the Community Reinvestment Act of 1977 obligated banks to provide mortgage services to creditworthy borrowers in the communities in which they operate, one of several laws passed in that decade that aimed to reduce credit-related discrimination.
Researchers led by Sudipta Basu of Temple University’s Fox School of Business set out to see how ESG-rated banks compared in meeting the CRA’s call for equitable lending. The team found that banks with high ESG ratings issued fewer mortgages in poor communities, both in quantity and dollar amount.
The authors reported in The Review of Accounting Studies that banks with high ESG ratings were more likely than banks with low ESG scores to stop lending in low-income counties affected by hurricanes, a potential example of “social washing” in action as banks profess altruism in marketing efforts despite making lending decisions that impede housing market recovery.
Basu and his team noted that mutual funds have recently publicly shunned green bonds issued by prominent banks, joining the chorus of researchers and regulators skeptical of ESG claims. In regulators’ view, the authors said, “firms talk the ESG talk, but often do not walk the ESG walk.”
The Sept. 30-Oct. 2, 2022, survey was conducted among a representative sample of 2,211 U.S. adults, with an unweighted margin of error of +/-2 percentage points.