European Financial Regulators Define Greenwashing, Outline Risks and Propose Mitigation Approaches

In progress reports to the European Commission (EC) published on June 1, 2023, the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA) have articulated a common, high-level definition of greenwashing and outlined greenwashing risks, impacts, proposed mitigation efforts and challenges for their respective industries (the Progress Reports).

The Progress Reports are a culmination of a process commenced in May 2022 during which the EC had requested that the European supervisory authorities (ESAs) provide input on greenwashing risks in the financial sector and the supervision of sustainable finance policies, including a common understanding regarding, and the most relevant types of, greenwashing; risks that greenwashing pose to entities, investors and consumers in various financial sectors; supervisory practices, experiences and capacities, including tools to monitor greenwashing; and issues related to the current legislative framework.