Show greenwashing the red card – How Europe can make sustainable finance work

Summary:

What Europe needs is not a regulatory pause, but better legislation. In record time, the European Union (EU) has rolled out a comprehensive disclosure regime for sustainable finance. But the nascent regulatory framework is challenging to implement, remains vulnerable to abuse by those seeking to game the system and fails to provide meaningful guidance to investors. Despite detailed legislation, financial market participants differ significantly in their expectations of sustainable investment products and face the risk of greenwashing, where issuers - intentionally or unintentionally - make misleading sustainability claims.

To enable private investment to finance Europe’s transition to net zero, this policy brief proposes short-term measures to combat greenwashing plus reforms that should be adopted once the next European Commission has assumed office. For the EU to uphold its status as a global benchmark for sustainable finance, lawmakers and regulators must urgently improve the rules in place and ensure that they are applied consistently across member states.

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