EU regulators have discovered proof of widespread greenwashing throughout the monetary system, as issues develop that banks, asset managers and insurers are overstating their local weather credentials.
There had been a “clear improve” within the danger of EU banks and different monetary establishments misrepresenting their sustainability efforts, the European Banking Authority mentioned on Thursday.
A selected drawback was banks and buyers selling their assist for initiatives akin to clear vitality whereas failing to say additionally they financed tasks linked to fossil fuels, deforestation and human rights abuses, the EBA mentioned.
One financial institution portrayed its funding in an airport as “environmentally sustainable”, in keeping with the regulator. One other described its financing of an organization constructing an oil sands pipeline within the face of opposition from indigenous individuals as “sustainability linked”. Clients had additionally been misled in regards to the carbon footprint of particular person portfolios.
The warning got here as campaigners have been pursuing a lawsuit towards BNP Paribas, the eurozone’s largest financial institution, in a French court docket for lending to grease and gasoline tasks whereas selling its assist for cleaner vitality sources.
Benchmark suppliers, asset managers and funding advisers additionally face regulatory scrutiny. “Cherry-picking, omission, ambiguity, empty claims (together with exaggeration), deceptive use of ESG terminology akin to naming and irrelevance, are seen as essentially the most widespread deceptive qualities,” the European Securities and Markets Authority mentioned.
Individually, the Frankfurt-based European Insurance coverage and Occupational Pensions Authority warned that greenwashing was having a “substantial influence” on shoppers of insurance coverage and pension merchandise.
The bloc’s banking, securities and insurance coverage watchdogs had been responding to a request by the European Fee to establish areas the place greenwashing is rife. Regulators are additionally attributable to report in a yr’s time on how their supervisory powers could possibly be prolonged to deal with these issues.
The EU has been attempting for years to carry transparency to the growth in funds, bonds and different monetary merchandise labelled “inexperienced”, and to rein in exaggerated advertising statements on firm’s local weather commitments.
Lawmakers within the bloc on Thursday backed guidelines that may tie govt pay to firms’ efforts to observe for human rights and environmental abuses of their provide chains, though campaigners argued that its software to monetary establishments remained imprecise.
In a decent vote within the European parliament, MEPs voted in favour of a “significant slice” of administrators’ pay being linked to company environmental and social due diligence and making local weather transition plans necessary for firms.
Elise Attal, head of EU coverage on the UN Rules for Accountable Funding, mentioned the vote was “an necessary step ahead . . . within the EU’s sustainable finance coverage structure”, however added that the extent to which the monetary sector could be affected nonetheless wanted clarification.
The directive, which was first proposed by the fee final yr, is designed to power firms to account for and treatment environmental and human rights points of their provide chains so as to keep away from disasters such because the collapse of the Rana Plaza manufacturing unit in Bangladesh in 2013, which resulted within the deaths of greater than 1,100 staff.
However it has been contested all through the legislative course of, with business and politicians arguing that it locations an pointless burden on firms.
An effort by the fee to chop reporting necessities for firms by 1 / 4 has already resulted within the watering down of sustainability reporting guidelines on the draft stage, the Monetary Occasions revealed final week.
The due diligence guidelines should now be negotiated with the EU’s 27 member states earlier than changing into legislation and will face additional challenges amid a wider pushback towards the bloc’s environmental agenda, largely from conservative lawmakers.
Terry Reintke, joint chief of the parliament’s Inexperienced group, mentioned she feared the more and more heated politics across the EU’s local weather legislation would solely develop into tougher because the bloc approached elections subsequent yr.
“So long as local weather was one thing that was theoretical and summary . . . everybody was in favour,” Reintke mentioned. “However now we get to implementation . . . issues get messy.”
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