[ESMA22-106-4384] SMSG Advice on Greenwashing

On 19 January 2023, the Securities and Markets Stakeholder Group (SMSG) published its response to the consultation by European Supervisory Authorities (ESAs‘) on greenwashing.
At the end of November 2022, the ESAs (EBA, EIOPA & ESMA) run a consultation on the subject of greenwashing until 10 January 2023. The purpose of the consultation was to gather information on how to understand the main characteristics, drivers and risks associated with greenwashing, and to collect examples of potential greenwashing practices. The ESAs will publish a progress report on the subject by May 2023, and a final report by May 2024.
The SMSG calls on the ESAs to provide a clear definition of greenwashing to avoid overprotective suppliers on the one hand and loss of consumer confidence on the other.
The SMSG underlines the relationship with „green-bleaching“, where ESG features are not labelled due to saving regulatory efforts and risks.
1. The whole terminology should be clarified, started with “green”, “ESG” and “sustainable”, “impact investing” and “sustainable investment”, in addition, article 8 and article 9 products need futher clarification.
2. Before introducing new legislative requirements, the current gaps should be identified properly, as many regulations already address greenwashing, the ESAs could provide a list of practices violating existing regulations.
3. Claims about ESG properties and targets and/or ESG metrics should be consistent with actual product properties. Unintentional mistakes should be treated differently than misrepresentation resulting from intent or gross negligence.
4. ESAs should recognise the need to cover both primary and secondary and derivatives markets, as well as the full range of ESG strategies.
5. Clear wording helps to better manage expectations by ensuring that products meet investors‘ expectations and ultimately reduces the potential for greenwashing.
As the above is only a brief summary, you may refer to the original response document for further details.