The European Securities and Markets Authority (ESMA), European Banking Authority (EBA), and European Insurance and Occupational Pensions Authority (EIOPA) issued individual reports Tuesday reiterating “the common high-level understanding of greenwashing as a practice whereby 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,” the agencies said in a joint press release.
The reports were written in response to a request by the European Commission for the agencies to weigh in on the phenomenon of greenwashing.
The agencies stressed it is the responsibility of financial market players to provide sustainability information that is “fair, clear, and not misleading.” All three agencies noted an uptick in the number of greenwashing incidents reported by national competent authorities (NCAs).
In its report, ESMA said the supervision of greenwashing-related claims is a priority for the NCAs, which along with ESMA are “taking steps to better monitor and detect greenwashing and to critically scrutinize sustainability-related claims in various sectors.” Supervisory common actions have been launched to address greenwashing, and the NCAs are using supervisory technology to “further embed greenwashing risks in their respective supervisory work programs.”
The EBA’s report said monitoring of greenwashing should be accomplished within existing bank supervision efforts, particularly within rules on consumer/investor protection “that provide the legal basis for tackling misleading statements and sustainable finance-related developments, including ESG (environmental, social, and governance) disclosures and transition plans that should enhance transparency on sustainability practices.” However, the EBA noted such measures are still in the early stages of implementation and “are not fully visible yet.”
In its report, the EIOPA said supervisory authorities need more resources and expertise to tackle greenwashing, and a sustainability-related framework must be created that works for insurance and pension consumers and providers.
“[S]everal challenges in the supervision of greenwashing remain, notably: resource constraints, a lack of sustainability-related data, the complexity of the regulatory framework, and a lack of common approach to supervise greenwashing,” the report said in its executive summary.