Greenwashing, the hard fist of the EU that continues to fight

Greenwashing, the hard fist of the EU that continues to fight

European surveillance of greenwashing goes a step further and the community race to consolidate the primacy in the real management of sustainable finance has recently been enhanced with the joint agreement of the three Brussels authorities that supervise banks (Not) insurance and pensions (Eiopa) and financial markets (Esma) to give an even clearer and clearer definition of unfair financial practices in the environmental field.

Esma, Eba and Eiopa published the Progress Report on Greenwashing at the beginning of June, declaring without metaphors the nature of the problem of greenwashing as a factor in market manipulation and consumer good faith.

Greenwashing, in the report, is coded as “a practice in which sustainability-related statements, actions or communications do not clearly and correctly reflect the underlying sustainability profile of an entity, financial product or financial service. This practice may be misleading to consumers, investors or other market participants." and is therefore extended compared to the traditional circle of reference which starts above all from company communication, without focusing on the actual choices of investors.

To date, regulations on greenwashing have mainly concerned rules linked to products presented as “sustainable” in the creation and assembly process but actually impacting the environment, especially in self-defined sustainable sectors, or in companies' evasive practices with respect to internal objectives of decarbonization and protection of sustainable development. Today we take a step further: sustainability trumpeted but not applied can mislead investors who can also incorporate attention to the ESG ratings of companies into their choices as a motive for their decisions as market players. And it is comparable in risk to policies that underestimate the environmental impact on economic growth. In both cases, in fact, when the cases are made public we witness the “loss of investor confidence in ESG markets, a reduced drive to make financial policies sustainable and a decline in the financial system's ability to support the transition towards a sustainable economy”.

A structural, trust and economic planning problem, which the regulators of what remains the largest economic area on the planet and the first in terms of regulatory effectiveness and financial transparency want to resolve. Eba, Esma and Eiopa invite you to put down on paper the ESG modeling strategies of products aimed at environmentally sustainable investments in financial portfolios and to codify realistic and data-based paths so that companies can structure their sustainability policies.

In a context in which 57% of European funds have reached an effective level of attention and transparency for sustainability according to the requirements of Article 8 of the EU Green Taxonomy and in which also the European Central Bank and EU Commission push against greenwashing, the piece of the three market supervisory authorities can close the regulatory path. On which the Italian approach greatly influences: Rome with Ispra monitors the fight against greenwashing and is at the forefront of regulatory and sanctioning tools to penalize those who abuse this practice, producing incorrect and manipulative corporate communication.

The idea of ​​a market not left to its own devices, guided but not dominated by regulations and transparent for operators is fundamental for finance to be sustainable: and the defeat of greenwashing practices is essential to materialize it.