On 4 December 2023, the International Organization of Securities Commissions (IOSCO) published a final report, Supervisory practices to address greenwashing.

The final report provides a mapping of the regulatory and supervisory approaches and practices (current or planned) by regulators to address greenwashing in the areas of asset managers and ESG ratings and data product providers, including challenges and data gaps hindering the implementation of the 2021 IOSCO recommendations on sustainability-related practices, policies, procedures, and disclosure in asset management.

The final report is based on the responses received to a survey covering 22 jurisdictions and discussions held through various roundtables, both with industry participants and regulators. The final report also incorporates the feedback received from IOSCO’s affiliate members consultative committee about the steps taken by industry participants to implement the November 2022 call for action on good sustainable finance practices.

Among other things the final report notes that:

  • There is no global definition of greenwashing.
  • Most jurisdictions have in place supervisory tools and mechanisms to address greenwashing in the area of asset managers and their products.
  • Educational, awareness measures and capacity building activities are also used as proactive tools to prevent greenwashing. Some regulators provide guidance or establish some requirements about the knowledge asset manager staff are expected to have for handling and offering sustainable finance products to retail investors.
  • The market for ESG ratings and data products is in a phase of rapid growth. The final report notes that the ESG ratings and data products market remains largely unregulated although a few jurisdictions are currently developing mandatory or voluntary policy frameworks for ESG ratings and data products providers. The final report sets out the key elements of these new frameworks.
  • The cross-border nature of sustainable finance investments requires adequate cross-border cooperation. Securities regulators have put in place different mechanisms and tools to assist each other throughout the regulatory cycle (i.e., licensing, supervision/oversight, and enforcement).
  • Greenwashing will remain a high risk to the reputation of global sustainable finance markets until the quality and reliability of information available to investors improve.