CONSULTATIE | Clear greenwashing definitions crucial: regulatory uncertainty should not be confused for greenwashing
The European Supervisory Authorities (ESAs) published their Call for Evidence on Greenwashing on 15 November 2022. On 10 January DUFAS responded to this call of evidence. We share the greenwashing concerns of the ESAs and consider it crucial to provide clear definitions and guidance on greenwashing and to take harmonized supervisory actions to address those risks.
Greenwashing as misleading others using factually incorrect sustainability claims
We believe greenwashing within the financial sector consists of two components: (i) knowingly misrepresenting sustainability-related practices or features of a product and/or using information, that also may be factually incorrect or omitting certain relevant information (ii) with the objective or intention to use this to mislead or induce the receiver of the sustainability claim. However, in the absence of intent there may still be greenwashing in case of gross negligence by the financial market participants making the claim.
Responding to regulatory uncertainty should not be confused with instances of greenwashing
Multiple key aspects and legal concepts in the EU sustainable finance regulatory framework have regulatory uncertainty. Greenwashing claims done by financial market participants in good faith may be based on legal interpretations that become invalid after additional legal clarification. Adjustments to incorporate new interpretations should not be considered instances of greenwashing if there was no intention to mislead consumers and investors.
Role of entities setting sustainability criteria should not be forgotten
Policymakers, regulators, standard setters, criteria developers and possibly also accountants and auditors also have important roles to play. Regulators in particular should set rules that are as simple as possible, unambiguous and based on full transparency. When regulatory requirements are unclear, further guidance is desirable, but diverging interpretations at the national level should be avoided.
More information
Would you like to respond, or should you have any questions? We would be pleased to hear from you. Please feel welcome to e-mail Ivan aan den Toorn, DUFAS policy advisor sustainability.
