On 4 June 2024, the European Supervisory Authorities (ESAs) published their final reports on greenwashing in the financial sector. 

Each ESA provides a stocktake of the current supervisory response to greenwashing risks under their remit and notes that Member State competent authorities (NCAs) are already taking steps in the area of supervision of sustainability-related claims. In addition, the ESAs provide a forward-looking view of how sustainability-related supervision can be gradually enhanced in coming years.

Key findings in the report produced by the European Securities and Markets Authority (ESMA) include:

  • NCAs are already taking steps to prioritise the supervision of sustainability-related claims, performing critical scrutiny of documentation, and exercising professional judgement.
  • NCAs and ESMA have been implementing a risk-based approach to supervision, focusing their supervisory attention and resources on the most significant risks.
  • So far, NCAs have reported having detected only a limited number of actual or potential occurrences of greenwashing. This may reflect multiple factors, including low level of signals (e.g., complaints) reaching NCAs, limited financial literacy, constraints on NCAs’ resources and expertise for detection, and NCAs’ difficulties to access good quality data.
  • Formal enforcement decisions are, up to now, limited as well. This reflects the fact that NCAs have addressed irregularities related to sustainability-related claims mostly in their ongoing supervision.
  • The use of SupTech tools may increase supervisory efficiency, without replacing professional judgment exercised by supervisors. Only a few NCAs reported using SupTech tools by now. However, the majority of NCAs either are already developing such tools, planning, or considering doing so in the future.

The ESMA report also sets out certain recommendations to NCAs.

In its report the European Banking Authority (EBA) notes, among other things, that at the entity level, institutions should substantiate forward-looking sustainability commitments such as net-zero pledges with credible plans and strategies, provide clear and granular information on their green and sustainable finance targets, and integrate greenwashing-related financial risks as part of their management of conduct, operational and reputational risks. At the product level, institutions should establish and report clear criteria, definitions and indicators for products and/or services labelled as green or sustainable. They should also apply rigor and closely engage with counterparties in designing sustainability-linked products in particular sustainability-linked loans.