While sustainable finance is a booming industry, it is still characterised by unclear definitions of key concepts and a lack of comprehensive, comparable and transparent ESG data. In a context where litigation is multiplying--with some spectacular fines such as the $4m penalty levied by the US regulator SEC on Goldman Sachs for “misuse” of ESG credentials on 24 October 2022--and controversies such as the one launched by a , the risk of being accused of greenwashing is worrying investment professionals.
As the European supervisory authorities launch a of financial industry stakeholders to better define the contours of greenwashing, the European Fund and Asset Management Association, in its to the consultation, said it was “crucial to first have a unified understanding of the core attributes of greenwashing within the market and to have harmonised supervisory action to address greenwashing risks.” The aim is to prevent the notion of greenwashing from leaving the professional arena and entering the realm of controversies.
For the association, which represents the interests of the investment fund industry at European level, the assessment of greenwashing must include two elements: “knowingly misrepresenting sustainability-related practices or features of a product; with the objective or intention to mislead or induce the receiver of the sustainability claim.” In the absence of an intention to mislead an investor, the offence could however be constituted in case of “there may still be greenwashing in case of gross negligence on the financial market participants making the claim”, Efama conceded. This should not be the case for “unintentional mistakes or changes in data reported”.
“It is important that the existing regulatory framework and possible gaps are first identified before introducing any new legislative requirements,” Efama told regulators. “New guidance around greenwashing should be embedded into the existing frameworks, and there should be a consistent and harmonised approach on both the EU level and the international level.”
The filing echoed the recent move by fund promoters to downgrade funds hitherto considered as the greenest possible (article 9 funds) to the lower category (article 8). And it highlighted the fact that the current criteria are still too subjective. This was seen in the controversy over the sustainability of gas and nuclear in the European taxonomy.
Efama called for asset managers’ sustainability statements be assessed in the light of scientific advances. In other words, that these statements are not sustained over time.
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