The European Insurance and Occupational Pensions Authority (EIOPA) has set out its key proposals aimed at enhancing the supervision of greenwashing and at improving the sustainable finance regulatory framework.

It stated that recent national supervisory activities and its own market monitoring had found a rising number of potential greenwashing cases across the single market.

In 2024, five member states’ national supervisors reported instances of greenwashing, up from three in 2023, and six more National Competent Authorities were currently investigating potential cases, up from five last year.

“If left unaddressed, greenwashing could undermine genuine efforts to finance the sustainable transition and erode consumers’ trust in Europe’s insurance and pensions sectors,” EIOPA warned.

In light of this, EIOPA set out four ‘key proposals’ that national supervisors should consider when probing undertakings’ sustainability claims.

The first was that sustainability claims made by a provider should be accurate, precise, and should fairly represent the provider’s profile and/or the profile of its products.

Secondly, sustainability claims should be substantiated with clear reasoning, facts, and processes, while, thirdly, sustainability claims and their substantiation should be accessible by the targeted stakeholders.

Finally, sustainability claims should be kept up to date, and any material change should be disclosed in a timely manner with a clear rationale.

Its final report offered guidance on applying these principles, with real-world examples of good and bad practices throughout the pension lifecycle.

“Beyond supervisory challenges, EIOPA also reviewed the implementation of sustainability-related requirements,” the authority said.

“In our final report, we suggest potential improvements to existing regulation by clarifying what non-life insurance products with sustainability features are and by adopting a more consumer-centric approach in the Insurance Distribution Directive (IDD).

“Additionally, the European Supervisory Authorities (ESAs) are preparing an Opinion on the Sustainable Finance Disclosure Regulation (SFDR), which will be published soon and may indicate further enhancements.”

The ESAs, the European Banking Authority (EBA), EIOPA, and European Securities and Markets Authority (ESMA), have all published their final reports on greenwashing in the financial sector, calling for enhanced supervision and improved market practice on sustainability-related claims.

In their reports, the ESAs described greenwashing as a practice whereby sustainability-related statements, declarations, actions, or communications do not clearly or fairly reflect the underlying sustainability profile of an entity, financial product, or financial services.

Furthermore, this practice may be misleading to consumers, investors, or other market participants, and the ESAs stressed that financial market players have a responsibility to provide sustainability information that is fair, clear, and not misleading.

The ESAs’ reports also provided a view on how sustainability-related supervision can be gradually enhanced.

EIOPA noted that, as the demand for sustainability rises, pension providers were increasingly adopting environmentally friendly business models and offering more sustainable options.

“While this shift can be a positive step toward a net-zero economy, it also brings the risk of greenwashing - when financial service providers misleadingly portray themselves and/or their products as more sustainable than they truly are,” EIOPA added.

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