BaFin to reign in greenwashing as part of new sustainability strategy

July 17, 2023|Written by |BaFin

Germany’s banking regulator, BaFin, plans to tackle greenwashing as part of its newest sustainable finance strategy efforts.

The financial regulator thinks greenwashing is one of the biggest risks facing the transition towards a net-zero world.

“Greenwashing destroys trust. It is one of the biggest risks of transformation financing. We at BaFin are taking decisive action against it,” Mark Branson, president of BaFin, said at a banking conference, according to Reuters.

BaFin published its sustainable finance strategy to help support the financial sector in transitioning towards a climate-neutral world and greener economy. A significant part of that strategy is preventing and combatting greenwashing, which the regulator says can undermine confidence in sustainable markets. That includes making sure financial institutions are compliant with ESG disclosures under the EU’s sustainable finance disclosure regulation, as well as the corporate sustainability reporting directive.

The other areas of focus include ensuring adequate risk regulation, providing reliable data on financial climate risks, managing environmental financial risks, and exchanging knowledge.

The strategy isn’t meant to direct financial flows or push ESG investing but to make sure financial institutions have adequate risk management and that investors are able to make investments based on their sustainability preferences, the report stated.

BaFin is the latest regulator to crack down on greenwashing. Last year Deutsche Bank’s subsidiary DWS Group was raided over allegations that it misled investors about green investments.

Meanwhile, the UK’s financial regulator has voiced concerns about greenwashing in sustainable loans, while in Ireland the central bank warned it would increase its scrutiny of sustainability credentials.

This page was last updated July 17, 2023

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