Embellishing Reality: Do Financial Experts Detect Ambiguous Wording and a Potential Say-Do Gap in Annual Reports?

Over the past two decades, ESG reporting has become an integral part of how companies and banks communicate with investors and the public, and the volume of disclosure grows every year. But is all this information actually read? And can readers distinguish genuine commitment from wording that paints a rosier picture than reality?

Embellishing reality rarely involves false information. Most companies are neither "entirely green" nor "entirely polluting", and a chairman's letter may declare a commitment to reducing emissions while also noting caveats that point to continued emission-intensive activity. All the information is there, but the way it is presented may shape how readers interpret it. We call this "potential embellishment": not necessarily deliberate deception, but complex wording that reasonable readers may understand differently. The issue is drawing growing regulatory attention: according to the European Banking Authority, alleged greenwashing cases in the EU financial sector rose from about 40 in 2018 to about 206 in 2022.

We therefore asked whether financial experts, such as analysts, risk managers and credit officers, detect ambiguity and potential embellishment when reading a letter to shareholders, and whether detection is related to their investment recommendations. Unlike greenwashing in its common sense, the question here is not deception but whether readers connect the pieces. In our experiment, for example, the bank declared progress toward net zero by 2050, and in the same paragraph stated that the target would not be achieved by ending financing to energy companies.

How Did We Examine the Question?

Rather than looking at market reactions or computerized text analysis, we focused on the moment of reading itself, measuring readers' attention through eye-tracking. In a pre-registered field experiment, 128 financial experts read a simulated bank chairman's letter presented across three screens. Participants were randomly assigned to two groups that differed only in the opening screen, which emphasized either the bank's sustainability (ESG) goals or its digital innovation goals. The next screens, identical for all, presented neutral financial data and then ambiguous paragraphs that hedged the positive messages in both areas. Digital innovation served as a comparison: like sustainability, it relies on forward-looking goals that are hard to verify, but it carries less moral and regulatory weight. Participants then rated how much the bank embellished reality and gave an investment recommendation.

What Did We Find?

Attention is associated with detection in the ESG context: The more attention experts paid to ambiguity in the text, the more embellishment they detected, but only in the group that read the sustainability opening. The association held after accounting for participants' prior knowledge and attitudes, suggesting that critical-reading training may help.

What happens when readers detect embellishment: Participants who detected more embellishment tended to give the bank a lower investment recommendation. There were also preliminary signs that a sustainability-focused opening softened this decline, a possible "halo effect" of the green label, although this finding ran contrary to our prediction, is not statistically robust and requires further testing.

Those less exposed to ESG discourse detected more: Surprisingly, participants less familiar with regulatory and media discourse on ESG detected more embellishment. One possible explanation, formulated after the results, is that prolonged exposure normalizes certain phrasings and raises the threshold at which a gap in the text sets off a red flag.

What Can We Learn?

The main challenge may not be a lack of information, but the limits of readers' attention. Transparency is not only about what is disclosed, but about how it is organized and highlighted. Yet the responsibility does not lie with report writers alone: financial experts should read reports systematically, look for hedging paragraphs and forward-looking statements without quantitative targets or timelines, and compare the positive opening with the caveats that follow. Familiarity with ESG is no substitute for critical reading.

The Broader Context

The study is part of the author's doctoral research, which examines attention to financial reporting from several angles, from how experts read reports to how banks phrase them over time. The studies are currently under peer review.

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Lilah Shema Zlatokrilov is a doctoral candidate at the Hebrew University Business School, supervised by Prof. Dan Galai and Prof. Zvi Wiener, and a research economist at the Bank of Israel Research Department. The study was conducted with Dr. Abigail Hurwitz (Hebrew University) and Dr. Sven Nolte (Radboud University). Hurwitz, Abigail and Nolte, Sven and Shema Zlatokrilov, Lilah, Spotting "Washing": Can Financial Experts Detect the "Say-Do Gap" in Banking Reports? (December 31, 2025). Available at SSRN: https://ssrn.com/abstract=6725405

The views expressed are those of the authors and do not necessarily reflect those of the Bank of Israel.

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