European regulation chiefs lead probe into greenwashing

ESA, Regulation, GreenwashingEurope’s three financial regulatory powerhouses have started a probe into the impact of greenwashing in the sustainability-products market.

The call for industry feedback has come from the European Supervisory Authorities (ESAs), which was set up 12 years ago to help develop financial services regulation and supervision across the EU. 

The body is made up of the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), which are both based in Paris, and the European Insurance and Occupational Pensions Authority (EIOPA), which is in Frankfurt.

On Tuesday, they published an open online invitation called ‘ESAs call for evidence on greenwashing’.

Instructions with the survey say: “[This] seeks input on potential greenwashing practices in the whole EU financial sector, including banking, insurance and financial markets, and which may be relevant to various segments of the sustainable investment value chain and of the financial product lifecycle.

“All interested parties are welcome to contribute to the survey, including financial institutions under the remit of the three ESAs and other stakeholders ranging from retail investors and consumers associations to NGOs and academia.

“Respondents are invited to contribute to this Call for Evidence (CfE), both to the common part and to the ESA-specific sections, or to those sections of the CfE which are relevant for a given respondent”

The deadline for responses is Tuesday, January 10, 2023, and ESAs have reserved the right to not publish any feedback deemed offensive, defamatory, off-topic or confidential.

The ESAs are far from the first to raise concerns about the proliferation of greenwashing, a term used to describe marketing aimed at duping consumers into believing products are having a greater positive environmental impact than they actually are.

And new research from analytics specialist Refinitiv Lipper suggests investors are now actively shifting away from greenwashing susceptible Article 8 funds.

They found there has been an increase in demand for Article 9 funds, which have more objectively-measured sustainability results in comparison to claims under the EU’s Sustainable Finance Disclosure Regulation (SFDR) framework.

Refinitiv looked at data related to ESG-related products in the nine-month period to September 2022, and found Article 9 funds had net inflows of €32.8 billion, while Article 8 offerings had outflows of 173 billion euros. 

The practice of greenwashing has increased in line with a huge appetite for sustainability investing, with the ESG industry valued at about £35 trillion in the summer of 2022.

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