Three European financial supervisory authorities (ESAs) have launched a probe into the impact of greenwashing in the sustainability-products market.
The call for evidence on greenwashing invites a wide range of stakeholders to discuss the practice which undermines the effectiveness of using the financial sector to foster environmental improvement.
The European Supervisory Authorities (ESAs) was established 12 years ago to help develop financial services regulation and supervision across the European Union.
The body comprises the Paris based European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) as well as Frankfurt headquartered European Insurance and Occupational Pensions Authority (EIOPA).
EBA, EIOPA and ESMA, which need the information for their own work around sustainable investment, said that the investigation was “to gather input from stakeholders on how to understand the key features, drivers and risks associated with greenwashing and to collect examples of potential greenwashing practices”.
It added, “Due to the growing demand for sustainability-related products and the rapidly evolving regulatory regimes and sustainability-related product offerings, the call is also motivated by the need to better understand which areas may become more prone to greenwashing risks.”
They also noted their interested in input on potential greenwashing practices relevant to various segments of the sustainable investment value chain, as well as to the financial product lifecycle.
“In the context of this call, the term ’greenwashing’ is broadly used, recognising that sustainability-related claims can be linked to all aspects of the ESG spectrum,” the ESAs said.
The deadline for comments on greenwashing to the ESAs is a minute to midnight on 10 January 2023.
Although greenwashing is not a new concern, it has become more significant as investor increase allocations to ESG funds. Estimates value the ESG industry at about £35 trillion in the summer of 2022.
Recent research from analytics specialist Refinitiv Lipper found that investors are now actively shifting away from greenwashing susceptible Article 8 funds and moved towards Article 9 under the EU’s Sustainable Finance Disclosure Regulation (SFDR) framework.
In number terms, Refinitiv looked at data related to ESG-related products in the nine-month period to September 2022. It reported Article 9 funds had net inflows of €32.8 billion, while Article 8 offerings had outflows of €173 billion. euros.
