Unmasking Greenwashing in Finance: A PROMETHEE II-Based Evaluation of ESG Disclosure and Green Accounting Alignment

George Sklavos, Georgia Zournatzidou, Konstantina Ragazou () and Nikolaos Sariannidis
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George Sklavos: Department of Business Administration, University of Thessaly, 41500 Larissa, Greece
Georgia Zournatzidou: Department of Business Administration, University of Western Macedonia, 51100 Grevena, Greece
Konstantina Ragazou: Department of Management Science and Technology, University of Western Macedonia, 50100 Kozani, Greece
Nikolaos Sariannidis: Department of Accounting and Finance, University of Western Macedonia, 50100 Kozani, Greece

Risks, 2025, vol. 13, issue 7, 1-32

Abstract: This study examines the degree of alignment between the actual environmental performance and the ESG disclosures of 365 listed financial institutions in Europe for the fiscal year 2024. Although ESG reporting has become a standard practice in the financial sector, there are still concerns that the quality of the disclosure may not accurately reflect substantive environmental action, which increases the risk of greenwashing. This study addresses this issue by incorporating both ESG disclosure indicators and green accounting metrics into a multi-criteria decision-making framework. This framework is supported by entropy-based weighting to assure objectivity in criterion importance, as outlined in the PROMETHEE II method. The Greenwashing Risk Index (GWI) is a groundbreaking innovation that quantifies the discrepancy between an institution’s classification based on ESG transparency and its performance in green accounting indicators, including environmental penalties, provisions, and resource usage. The results indicate that there is a substantial degree of variation in the performance of ESGs among institutions, with a significant portion of them exhibiting high disclosure scores but insufficient environmental substance. These discrepancies indicate that reputational sustainability may not be operationally sustained. The results have significant implications for regulatory supervision, sustainable finance policy, and ESG rating methodologies. The framework that has been proposed provides a replicable, evidence-based tool for identifying institutions that are at risk of greenwashing and facilitates the implementation of more accountable ESG evaluation practices in the financial sector.

Keywords: greenwashing; ESG disclosure; green accounting; financial institutions; PROMETHEE II; entropy weighting; MCDM; environmental performance; sustainability assessment (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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