Cherry-picking, omission, ambiguity, and empty claims are named as some of the most widespread misleading ESG qualities in a progress report on greenwashing in the financial sector published by the European Supervisory Authorities (ESAs).
The ESAs include the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA).
The alliance understands greenwashing as a practice where sustainability-related statements, declarations, actions, or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product, or financial services.
It has warned that this practice may be misleading to consumers, investors, or other market participants with the progress reports setting out to provide such market participants and regulators with a shared reference point in dealing with the greenwashing phenomenon.
As a preliminary remediation action, comprehensibility of sustainability disclosures to retail investors needs to be improved, including by establishing a reliable and well-designed labelling scheme for financial products.
The regulatory framework also needs to gain in maturity, key concepts need to be clarified, and sustainability impact or engagement must be better integrated.
The new reports follow a request last year by the European Commission for input from the ESAs on several aspects related to greenwashing and its related risks, and on the supervisory actions taken and challenges faced to address those risks.
The ESAs will publish final greenwashing reports in May 2024 and will consider final recommendations, including on possible changes to the EU regulatory framework.