Speaking of greenwashing, The International Organization for Securities Commissions recently published its Supervisory Practices to Address Greenwashing. The 94-page document discusses greenwashing risks in sustainable investing, gives an overview of regulatory initiatives by global regulators to reduce greenwashing, and provides recommendations for regulators looking to reduce greenwashing. greenwashing threatens the credibility of sustainable finance and stopping it means engaging numerous stakeholders. The document states that:
“Sustainable finance is a constantly evolving space. Corporates, asset managers, ESG ratings and data products providers, investors, information providers, regulators and policy makers will need to act in concert to combat greenwashing and help build a more reliable ecosystem to ensure trust in sustainable finance markets. This future remains however dependent on the ability of all stakeholders to ensure healthy conduct and adequate capacity – all supported by the overarching goal of fostering a culture of good practices throughout the investment value chain and preventing harm to investors and markets.”
Finance is critical for a more sustainable world, and greenwashing is an existential threat to that progress. If investors cannot trust that funds marketed as sustainable are what they claim to be, the system breaks down. Sustainable finance regulations are currently fragmented and many jurisdictions do not define greenwashing – those that do don’t always define it the same way. The IOSCO argues that global cooperation among market participants and regulators is necessary to bolster the credibility of sustainable investing. Many of these regulations are in their infancy and only time will tell which methods of regulation are the most effective.
While this guidance is intended for securities regulators, it may also be instructive to companies in assessing their own sustainability and climate communications.
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