On June 1, the ESAs (EBA, EIOPA and ESMA) presented their common understanding of greenwashing in the financial sector. The progress reports are an initial response to the European Commission’s request to the three ESAs for input on greenwashing risks related to Sustainable Finance. The ESAs’ shared understanding of greenwashing is based on input received during their November 2022 call for specific greenwashing practices(see TSI kompakt of 28 Nov 2022).
Key contents of the progress reports
- The ESAs understand greenwashing in the financial sector to be a practice whereby sustainability-related statements, declarations, actions or communications do not clearly and adequately reflect the underlying sustainability profile of a company, financial product or services.
- Greenwashing, he said, could undermine consumer and investor protection, market integrity, and thus the channeling of financial flows into financing sustainable transformation.
- An appropriate measure from the perspective of the ESAs is therefore the further development of previous ESG transparency requirements into a consistent, comprehensive and trustworthy ESG disclosure framework.
- In this context, the ESAs also highlight the final Draft RTS on sustainability factors for STS securitizations(see TSI kompakt of 1 June 2023).
Next steps
The ESAs plan to publish their respective final reports in May 2024. These will result in final recommendations on possible changes to the EU regulatory framework for an effective ESG disclosure framework.
- Progress reports of the ESAs (ESMA website)