EFAMA responds to ESMA’s Call for Evidence on Greenwashing

The European Fund and Asset Management Association, EFAMA, has published its Response to the ESA’s Call for Evidence on Greenwashing. Therein, the Association points out that far and foremost, it is necessary to establish a common understanding of what constitutes „greenwashing“. Only if such characteristics are known and equally applied, can financial market participants understand regulatory expectations in this regard and can level playing fields be created across various countries.
In this context, EFAMA also points to the difference between misleading with intent (on purpose) and due to regulatory uncertainty. Particularly in view of the lack of extensive, comparable, and transparent ESG data and in view of unclear sustainable finance concepts, financial market participants may not even be aware of the fact that they are „greenwashing their activities“. Nonetheless, in an effort to come up with an all-around definition of „greenwashing“, EFAMA would apply two criteria to determine whether or not „greenwashing“ exists, namely – as quoted:
1. knowingly misrepresenting sustainability-related practices or features of a product
2. with the objective or intention to mislead or induce the receiver of the sustainability claim
Furthermore, EFAMA recommends that before considering any new law or guidelines in this area, current regulatory gaps need to be identified, as there are already many rules and regulations covering „greenwashing“ to some extent.
Finally, EFAMA emphasizes the need for a coordinated and uniform strategy when addressing „greenwashing“ issues in the financial industry, throughout Europe and internationally.