On January 16, 2023, the European Securities and Markets Authority (ESMA) announced the initiation of a joint supervisory action (CSA) in partnership with the national competent authorities (NCAs) of the EU Member States. The CSA will cover the application of MiFID II (Markets in Financial Instruments Directive) disclosure requirements to marketing communications for financial products across the EU. The declared goal of the CSA is to better coordinate the supervisory culture in the EU member states. ESMA has mandated NCAs to review marketing communications (including advertising) for investment products and to verify that they are fair, clear and not misleading. The CSA will focus on marketing targeting younger consumers, including via apps, social media and collaborations with affiliates such as influencers. The CSA will be conducted throughout 2023.
ESMA also plans to use the CSA to gather information on possible greenwashing practices in the marketing and advertising of financial products. ESMA’s identification of greenwashing as a specific audit area is notable and demonstrates the ongoing focus on climate-based marketing practices by European regulators. Between 15 November 2022 and 16 January 2023, three European supervisors – the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and ESMA – have one demand evidence on potential greenwashing practices across the EU financial sector, including banks, insurance companies and financial markets. We reported on the Advice and the Answer by the Securities and Markets Stakeholder Group (SMSG), which warned that EU rules on greenwashing must also cover green bleaching.
Taking the temperature: ESMA’s focus on potential greenwashing practices in marketing materials for financial products across the EU is in line with a global trend and mirrors similar initiatives by other financial regulators. The UK’s Financial Conduct Authority (FCA) recently conducted a similar consultation on the regulation of sustainability claims by investment firms and plans to publish final rules by June 2023. In June 2022, the Australian Securities & Investments Commission (ASIC) published information guidance on how to avoid greenwashing when promoting sustainability-related products.
Enforcement activities related to misleading environmental claims in marketing materials for financial products are also increasing. As we reported in October, the UK Advertising Standards Authority ruled that two UK retail banking ads making claims about the financial institution’s environmental credentials were “misleading” and “omit key information”. In December, ASIC issued three violation notices to the Australian unit of a US-based asset manager for greenwashing violations. We expect further enforcement action throughout 2023 as financial regulators continue to focus on this area.
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