Stockholm (NordSIP) – In May 2022 the European Commission (EC) asked the three European Supervisory Authorities (ESAs) to help define and address greenwashing in the financial markets. Having produced an interim progress report in June 2023, the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) published their final report on 4 June 2024.
The report examines what National Competent Authorities (NCAs) in the EU member states have done so far to address the issue, and what plans they have for future improvements in greenwashing measures throughout the Sustainable Investment Value Chain (SIVC). Although instances of greenwashing do tend to generate significant media coverage, the ESAs observe that NCAs have so far relatively few such cases in their markets. The report considers the possibility that information flows may be inadequate and detection units under or poorly resourced. Alternatively, it may be that market participants are more conscious of the risks involved with overstating the sustainability credentials of their products and are therefore moderating their marketing claims.
The report highlights the need for better data and specialized staff to effectively address greenwashing. NCAs plan to recruit and train staff, often in collaboration with NGOs, and seek third-party data vendors to improve access to relevant information. ESMA supports creating common EU resources to ease the burden on individual NCAs and supervisory bodies.
ESMA Chair Verena Ross emphasized the importance of effective supervision of sustainability claims for investor protection and market trust. She noted that ESMA will continue to promote EU-level common supervisory actions and support NCAs in enhancing their supervisory capacities and tools.
Effective and consistent supervision of sustainability-related claims is critical to investor protection and a trustworthy environment for ESG markets. With a risk-based approach in mind, ESMA has promoted EU-level common supervisory actions across the sustainable investment value chain and will continue to foster convergent and effective supervision. We will also continue to support NCAs, to enhance supervisory capacities in this area and invest in the tools needed to address data challenges.
ESMA Chair Verena Ross
Ross also reminded financial market participants of their duty to avoid unsubstantiated sustainability claims and communicate sustainability information clearly and honestly. The ESMA report underscores the importance of existing EU legislation prohibiting misleading marketing information.
The report recommends the EC reinforce the mandates of NCAs and ESMA to better oversee industry benchmarks, promote retail investor education, and improve access to essential data.
