Europe’s financial sector regulators are launching a consultation on greenwashing, seeking insight on where and how it’s occurring — and what policymakers should be doing about it.
A trio of regulators — the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority — published a “call for evidence” that seeks feedback on the sources, drivers and risks that accompany greenwashing.
“Growing demand for sustainability-related products combined with rapidly evolving regulatory regimes and sustainability-related product offerings create a context that may be conducive to increased greenwashing risks,” the paper said.
In response to that growing risk, European policymakers are pushing regulators to step up their efforts to identify, prevent, and sanction suspected greenwashing.
To that end, the regulators’ consultation aims to better assess the significance of the risk, to review the regulatory and legislative framework in this area, and to consider possible responses.
“Obtaining a more granular understanding of greenwashing will help inform policy making and supervision and will help foster the reliability of sustainability-related claims,” the regulators said in a release.
In addition to informing potential regulatory policy, the consultation also seeks insight into the “areas may become more prone to greenwashing risks,” the regulators noted.
The consultation sets out several different ways in which firms can potentially be embroiled in greenwashing claims — creating misinformation, spreading it, and utilizing it.
“For instance, a corporate issuer can trigger greenwashing by understating its carbon emissions. This misleading claim could be communicated to both investment managers, ESG data providers and/or other market participants some of whom might continue to spread the misleading claim to the end investors/consumers, who will be the receiver of greenwashing,” it said.
The paper also indicated that greenwashing can occur at various stages, including at the product level, the firm level, or when firms are providing service/advice to clients.
“Greenwashing can occur at any point where sustainability-related statements, declarations or communications are made, including at different stages of the cycle of financial products/services or of the investment value chain,” it said.
The deadline for providing feedback to the consultation is Jan. 10, 2023.
The regulators are slated to provide an interim report with recommendations for addressing greenwashing to European policymakers in May 2023, with a final report due in May 2024.