In an environment with unclear definitions at EU level on key sustainable finance concepts, as well as a lack of complete, comparable and transparent ESG data, all market actors are concerned about the risk of greenwashing. In our response to the European Supervisory Authorities’ recent consultation on this, EFAMA stresses that the core attributes of greenwashing need to be understood to address misleading practices, and thereby strengthen the integrity and effectiveness of EU capital markets.
We highlight that greenwashing assessments should consist of two components:
1. knowingly misrepresenting sustainability-related practices or features of a product
2. with the objective or intention to mislead or induce the receiver of the sustainability claim
Where there is no intention to mislead or induce the receiver of the sustainability claim, there may still be greenwashing in cases of gross negligence on the financial market participants making the claim.
Significant areas of financial institution supervision already address numerous greenwashing aspects, therefore any current regulatory gaps should first be identified before proposing new legislation or guidance.
We also emphasise the need for an aligned and consistent approach when addressing greenwashing risks in the financial sector, across Europe and internationally, in order to reduce confusion and the risk of harmful market fragmentation.