ESAs coordinated approach on greenwashing risks
In their respective reports, the ESAs reiterate the common high-level understanding of greenwashing as a practice whereby sustainability-related statements, declarations, actions, or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product, or financial services. This practice may be misleading to consumers, investors, or other market participants. The ESAs stress again that financial market players have a responsibility to provide sustainability information that is fair, clear, and not misleading.
Each ESA provides a stocktake of the current supervisory response to greenwashing risks under their remit and notes that national competent authorities (NCAs) are already taking steps in the supervision of sustainability-related claims. In addition, the ESAs provide a forward-looking view of how sustainability-related supervision can be gradually enhanced in coming years.
While the ESAs’ reports focus on the EU’s financial sector, they acknowledge that addressing greenwashing requires a global response, involving close cooperation among financial supervisors and the development of interoperable standards for sustainability disclosures.
Greenwashing in insurance and pensions
As the demand for sustainability rises, insurance and pension providers are increasingly adopting environmentally friendly business models and offering more sustainable options to consumers. While this shift can be a positive step toward a net-zero economy, it also brings the risk of greenwashing – when financial service providers misleadingly portray themselves and/or their products as more sustainable than they truly are.
To combat this risk, EIOPA sets out key proposals aimed at enhancing the supervision of greenwashing and at improving the sustainable finance regulatory framework.
A unified approach to supervision
Recent national supervisory activities and EIOPA’s market monitoring have revealed a growing number of potential greenwashing cases across the single market. In 2024, five member states’ national supervisors reported instances of greenwashing (up from three in 2023), and six more NCAs are currently investigating potential cases, an increase from five last year. If left unaddressed, greenwashing could undermine genuine efforts to finance the sustainable transition and erode consumers’ trust in Europe’s insurance and pensions sectors.
Complementing the Final report, EIOPA is publishing its Opinion on sustainability claims and greenwashing, which sets out four key principles that national supervisors should consider when probing undertakings’ sustainability claims:
Principle 1: Sustainability claims made by a provider should be accurate, precise, and should fairly represent the provider’s profile, and/or the profile of its product(s).
Principle 2: Sustainability claims should be substantiated with clear reasoning, facts and processes.
Principle 3: Sustainability claims and their substantiation should be accessible by the targeted stakeholders.
Principle 4: Sustainability claims should be kept up-to-date, and any material change should be disclosed in a timely manner and with a clear rationale.
The final report offers practical guidance on applying these principles, with real-world examples of good and bad practices throughout the insurance and pension lifecycle.
Regulatory improvements
Beyond supervisory challenges, EIOPA also reviewed the implementation of sustainability-related requirements. In our Final Report, we suggest potential improvements to existing regulation by clarifying what non-life insurance products with sustainability features are and by adopting a more consumer-centric approach in the Insurance Distribution Directive (IDD). Additionally, the ESAs are preparing an Opinion on the Sustainable Finance Disclosure Regulation (SFDR), which will be published soon and may indicate further enhancements.
Read EIOPA’s Opinion on Greenwashing a Sustainability Claims
Watch our interview with national experts
Notes
EIOPA’s Final Report and the related Opinion on sustainability claims and greenwashing are a response to the European Commission’s Call for Advice on greenwashing and follow the publication of EIOPA’s Progress Report on the topic in June 2023.