ESAs call for better supervision to fight greenwashing
This week the European Supervisory Authorities (ESAs) published their final reports to close an investigation into greenwashing. With concern about greenwashing growing in tandem with rising interest in sustainable investments, it’s unsurprising that the results emphasise that supervision of ESG claims needs to be strengthened. The reports were published in a joint effort by the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA), and underscore the need to improve market practices so that claims made related to sustainability are sound and trustworthy.
The ESAs have coordinated their approach to tackle greenwashing, which involves misleading sustainability-related statements, declarations, or communications. This practice can deceive consumers, investors, and other market participants, undermining trust in sustainability claims. The reports highlight the ongoing efforts by competent authorities to supervise sustainability claims and suggest a forward-looking strategy to strengthen this supervision.
The EBA’s final report sheds light on the considerable increase in greenwashing in the banking sector, revealing a significant increase in alleged cases of greenwashing across all regions, including a 26.1% rise in the EU in 2023. The result is serious reputation risks, which must be tackled with accurate, trustworthy information. The EBA recommends that institutions take measures to ensure transparency and accuracy at both the entity and product levels.
The ESAs’ reports highlight the need for reporting standards to deliver trustworthy ESG data. They underscore the importance of the progress towards global, interoperable sustainability reporting standards. Such an international effort is necessary to deal with greenwashing risks, ensure consistency in sustainability reporting and restore trust in ESG claims.
Accurate and transparent reporting, supported by robust digital frameworks like XBRL, is key to maintaining investor confidence and ensuring the integrity of the financial markets.
Read the press release for more details.
