Acknowledging the European Supervisory Authorities (ESA) recent consultation on greenwashing European Fund and Asset Management Association (EFAMA) stated that the core attributes of greenwashing must be understood in order to handle misleading practices and thereby reinforce the integrity and effectiveness of European Union capital markets.
EFAMA asserted in an environment with unclear definitions at the EU level on fundamental sustainable finance concepts, as well as a lack of complete, comparative, and transparent ESG (Environmental, social, and governance) data, all market actors are concerned about the risk of greenwashing.
EFAMA suggestions
EFAMA suggested that greenwashing assessments should consist of two factors:
- deliberately misrepresenting sustainability-related practices or components of a product, and
- the objective or intention to misrepresent or induce the receiver of the sustainability claim.
Regarding ESA consultation, the regulatory policy adviser at EFAMA, Anyve Arakelijan, said that deliberately misleading behavior pertaining to sustainable investments should not be tolerated, she also added that due to the existing regulatory uncertainty and present evolution of the sustainability field, the term “greenwashing” should be used carefully and not used too extensively.
In addition, Arakelijan said that in order to keep investors’ confidence in sustainability, it is significant to understand what makes up greenwashing and there must be an organized supervisory action to minimize the risk.
More from EFAMA
EFAMA stressed that the current regulatory gaps must be identified before formulating new legislation and guidance, as important areas of financial supervision already address numerous greenwashing aspects.
In addition, Fund groups have warned over the EU definition of greenwashing. In respect of this, EFAMA said the EU should make use of existing rules and tools to combat greenwashing, and not increase intricacy by introducing a new definition separated from rules already in place.
EFAMA also noted the necessity for an aligned and constant approach when dealing with greenwashing risks in the financial sector across Europe and globally, to reduce the difficulty and the risk of toxic market fragmentation.
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