Released on June 1st by the three European Supervisory Authorities ("ESAs") (EBA, EIOPA and ESMA), the Progress Report provides an update on the forms and definition of greenwashing, the risks it poses, the implementation of policies to prevent it and improvements to the regulatory framework.

The ESAs common high-level understanding of greenwashing is as follows: “a practice where 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 Progress Report describes greenwashing, including core characteristics of the:

• Information, e.g. omission of information or falsehood

• Actions taken, e.g. misalignment of sustainability preferences

• Intention of claims, e.g. negligent or inappropriate

• Topic of claim, e.g. metrics, credentials or policies

• Way in which the information is misleading, e.g. presence or absence of information

• Level or scope of the claim, e.g. entity or product level

• Stage of business cycle, product or service

• Party or entity

• Outcome or impact on consumer

The Progress Report also assesses risks which range from financial risks at the product, entity and system-wide levels, followed by the drivers of greenwashing. Recognizing the risks and drivers by entity type – including issuers, investment managers, benchmark administrators, and investment services providers – the Progress Report highlights possible remediation actions to mitigate the various risks.

Lastly, the Progress Report provides insights into the monitoring and supervision of greenwashing.

A Final Report is expected to be published by May 2024 which will outline the ESA’s final recommendations, including possible changes to the EU regulatory framework.