The European Supervisory Authorities (ESMA, EBA, EIOPA) received a request for input from the Commission relating to greenwashing risks and supervision of sustainable finance policies. Therefore, they asked for input on potential greenwashing practices in the EU financial sector. On 10 January 2023, ESBG provided the ESAs with its contribution.
ESBG welcomes this call for evidence since greenwashing is an issue which must be tackled at the EU-level and would like to recall that banks and savings banks are intensively dedicated to the traceability, transparency and credibility of the sustainability features they have to consider in investment advice and financial portfolio management. The EU Taxonomy, the Sustainable Finance Disclosure Regulation (SFDR) and the Markets in Financial Instruments Directive (MiFID II) already aims at tackling greenwashing.
Nonetheless, ESBG regrets that these different regulations are currently based on a different understanding of greenwashing. The existence of a large amount of complex ESG information and data that needs to be provided to investors and clients can also create a perverse effect through an information overload which can facilitate greenwashing.
Therefore, in the interest of customers, banks, saving banks and issuers of financial products, ESBG assesses that there is an urgent need for a harmonization of the understanding of greenwashing within the framework of European legislations and supervisory practices. ESBG believes that it could be achieved through the following steps:
- First, there is a need to strengthen transparency through a consistent enforcement of existing EU regulations’ requirements.
- Then, a clear and scientifically comprehensible, as well as uniform legal definitions of both sustainability and greenwashing for financial instruments must be implemented, keeping in mind the need for practicality and feasibility for banks and saving banks when implementing these requirements.
