Final reports from ESMA, the EBA and EIOPA on greenwashing are due in May 2024, following publication of interim progress reports in June 2023 (interim EBA Report, interim ESMA Report, interim EIOPA Report). This arises from the European Commission's May 2022 request to the ESAs, asking for:
- input on the occurrence of greenwashing,
- feedback on the potential for greenwashing risks, and
- an overview and assessment of supervisory practices, experience, convergence and capacities relating to the prevention of greenwashing,
and subsequent calls for evidence issued by each of the ESAs (read our insights here: ESG Update: ESAs call for evidence on greenwashing).
The June 2023 interim reports included the ESAs common high-level understanding of greenwashing applicable to market participants across their respective remits – financial markets, banking, and insurance and pensions: "a practice where sustainability-related statements, declarations, actions, or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product, or financial services. This practice may be misleading to consumers, investors, or other market participants". For more information on the interim reports, read our insights here: Greenwashing in the financial sector: ESAs publish progress reports.
The final reports are keenly awaited, in particular whether a more granular approach is taken to defining greenwashing, or whether the 'high-level understanding' approach is retained, particularly in light of market concerns (for example, concerns raised by the ICMA in its report on Market Integrity and Greenwashing Risks in Sustainable Finance that exhaustive definitions of greenwashing could trigger "market paralysis or regression because of excessive reputational or litigation fears.")
CORPORATE SUSTAINABILITY DUE DILIGENCE DIRECTIVE
Following the European Parliament's endorsement of the provisional political agreement on the proposed Corporate Sustainability Due Diligence Directive (CSDDD) (Due diligence: MEPs adopt rules for firms on human rights and environment), formal endorsement from the EU Council is expected to take place on 15 May 2024, following which the CSDDD will be published in the Official Journal.
The text of the CSDDD as endorsed by the Parliament is here.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.