European markets regulator targets greenwashing in latest ESG report

The European Securities and Markets Authority has published a second thematic note regarding sustainability-related claims, seeking to provide greater clarity on ESG strategies for the financial sector.

The note concentrates on ESG integration and ESG exclusions, as references to these strategies are often made by market participants and widely referenced in marketing communications directed to retail investors.

Integration and exclusion strategies can mean different things to different market participants, which creates a complex landscape for those attempting to assess environmental or social impact.

The lack of transparency when using these terms poses a notable greenwashing risk to investors who may be misled by vague terminology.

The primary aim of the note is not to define these strategies officially, but to call on market participants to be clear about what they mean when referencing them in professional contexts.

Similarly to the first thematic note on ESG credentials, this latest publication offers practical do’s and don’ts for making sustainability claims to ensure market integrity.

These guidelines are illustrated through concrete examples of good and poor practices that are based on observed market practices across the European Union.

“The note concentrates on ESG integration and ESG exclusions, as references to these strategies are often made by market participants and widely referenced in marketing communications directed to retail investors,” the regulator explained.

“ESG integration and ESG exclusions can mean different things to different market participants,” the supervisor noted.

“Lack of transparency when using these terms poses a notable greenwashing risk to investors,” the authority warned.

“The aim of the note is not to define these strategies, but to call on market participants to be clear about what they mean when referencing them,” the financial markets regulator clarified.

“Similarly to the first thematic note on ESG credentials, this publication offers practical do’s and don’ts for making sustainability claims,” the officials stated.

“These are illustrated through concrete examples of good and poor practices that are based on observed market practices,” the report concluded.