Fixing data gap is key to fighting greenwashing, say EU supervisors

June 12, 2024|Written by |European Securities and Markets Authority, European Insurance and Occupational Pensions Authority, European Banking Authority

The EU’s three supervisory authorities have issued separate reports on the state of greenwashing across the financial sector, identifying a lack of access to quality data as a key barrier to rooting out the problem.

The European Securities and Markets Authority (ESMA), European Banking Authority (EBA) and European Insurance and Occupational Pensions Authority (EIOPA) published all three reports on Tuesday as part of a coordinated effort to stop financial products and services being falsely marketed as environmentally-friendly.

“The reports focus on the EU but acknowledge that addressing greenwashing requires a global response, involving close cooperation among financial supervisors and the development of interoperable standards for sustainability disclosures,” the agencies said in a joint statement.

The EBA report found “a clear increase in the total number of potential cases of greenwashing” across the banking sector from 2012 to 2023, with a 26.1% year-on-year increase in alleged cases in the EU in 2023 alone.

In its annual survey, EIOPA also noted an uptick in the number of national-level European supervisory agencies reporting incidents of greenwashing in the insurance and pensions sectors, rising to 11 from eight last year.

ESMA however said that national securities regulators had reported detecting “only a limited number of actual or potential occurrences of greenwashing”, and suggested that a lack of access to good data on supervised entities might be one reason for this.

EIOPA similarly identified “a lack of sustainability-related data” as a key challenge for supervisors’ efforts to crackdown on greenwashing, along with resource constraints, the complexity of the regulatory framework, and the lack of a common approach to the issue..

Assessments by distributors to ascertain whether insurance and pension products really do match their purported green credentials appear “at times to be insufficiently granular and precise”, EIOPA added.

The agency offered several recommendations, including tighter regulations on the sustainability-related information that must be disclosed on the websites of insurance and pension products.

As for financial markets, ESMA signalled that it may in the future issue “additional guidance for market participants and supervisors in high-risk areas of greenwashing”.

It added that national market regulators were expected to “gradually deepen their critical scrutiny of sustainability-related claims”, and to bulk up the human resources and technology assigned to this task.

“I would also like to remind all market players of their responsibility to avoid making unsubstantiated sustainability claims and to communicate any sustainability-related information in a manner that is fair, clear and not misleading,” said ESMA chair Verena Ross.

The agency reports come as a majority of EU member governments are pushing to water down the green claims directive, a new European law aimed at fighting greenwashing, according to the Financial Times.

This page was last updated June 13, 2024

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