European Regulators Launch Joint Consultation On Greenwashing – Financial Services

On November 15, three European supervisory authorities
(“ESA”s) — the European Banking Authority
(“EBA”), the European Insurance and Occupational Pensions
Authority (“EIOPA”) and the European Securities and
Markets Authority (“ESMA”) — announced a Call for Evidence on greenwashing. The ESAs
are seeking feedback on “potential greenwashing practices in
the whole EU financial sector, including banking, insurance and
financial markets, and which may be relevant to various segments of
the sustainable investment value chain and of the financial product
lifecycle.” The Call for Evidence defines greenwashing
“broadly” to include “sustainability-related claims
relating to all aspects of the ESG spectrum.”

In the consultation, the ESAs are requesting:

• views on how to understand greenwashing and the main drivers
  behind it;




• examples of potential greenwashing across the EU financial
  sector; and




• data to assist the ESAs in gaining a “concrete sense of
  the scale of greenwashing and identify areas of high greenwashing
  risks.”

The ESAs requested that all interested parties,
“including financial institutions under the remit of the three
ESAs and other stakeholders ranging from retail investors and
consumers’ associations to NGOs and academia,” submit
their responses by Tuesday, January 10, 2023. The ESAs anticipate
issuing a progress report in May 2023 and a final report in May
2024.

Taking the Temperature: Regulators and companies
continue to struggle to define what constitutes greenwashing. Just
this week, as we reported, the UN High-Level Expert Group on
the Net Zero Emissions Commitments of Non-State Entities published
a report that, in our view, proposed an aggressively broad
greenwashing definition that would sweep up conduct that ordinarily
would not be considered in the greenwashing calculus. As another
example, in May 2022, ESMA issued a supervisory briefing addressing
sustainability disclosures in the investment management industry.
By issuing a Call for Evidence, these regulators appear to
recognize the need for input from industry in light of the
significant impact regulatory articulations of greenwashing will
have on market participants.

(This article originally appeared in “Cadwalader Climate,” a twice-weekly
newsletter on the ESG market.)

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