Greenwashing, the Authority's advice to avoid slips

Once upon a time, there was a marketing push on sustainability, but the reputational crises of companies and the Trump administration's denialism have put the brakes on green talk. Meanwhile, Brussels has seen fit to legislate to curb greenwashing. European Directive 825 is from 2024 and will thoroughly amend the Consumer Code to strengthen the protections of those exposed to misleading environmental messages.

The European measure must be transposed by 27 March (and become enforceable by 27 September). The government has already approved the outline of the legislative decree that will incorporate the new rules into the Italia regulatory framework. The guidelines of the measure foresee an expansion of the prohibited commercial practices, introducing specific bans for unverifiable or misleading environmental claims; in addition, disclosure requirements will be increased and more information will be provided to consumers.

This will be the case in every commercial sphere. Here, however, we narrow the field to the protection of the saver. Finance has been the sector that has seen greenwashing flourish more than any other. On 14 January, the authority that oversees European financial markets (Esma) put on paper four guiding principles that must guide all green information, and thus not only documents required by law but also marketing communications, information brochures, websites and online platforms.

Here are the four principles: 1) Accuracy: statements should faithfully represent the sustainability of a product or organisation, avoiding exaggerations, omissions or the use of misleading terminology and images; 2) Accessibility: information should be easy to find and understandable to investors; 3) Support: every statement should be supported by clear and credible facts, processes and methodologies; 4) Timeliness: communications should reflect evolutions and updates.

Esma did not stop at general principles, but also provided concrete examples. From management companies that report the integration of ESG criteria, the authority asks for clarity on the existence of the constraint on the application of these parameters and how much this decision affects the portfolio composition. The same goes for exclusions (weapons, tobacco, alcohol and others): Esma asks for the criteria and thresholds for exclusions to be specified. Among the things not to do, Esma suggests not using the terminology 'Esg integration' as a generic umbrella term; not emphasising a higher sustainability profile if the impact on portfolio composition is minimal; not declaring exclusions if these are not applied consistently. Concrete negative examples given in the Esma document include the fund that calls itself Esg and claims to be 'substantially different' from the traditional version when the overlap of the portfolios of the two products is then 90 per cent; or the platform that claims to be planting trees to divert attention from unambitious fossil fuel exclusion thresholds is also mentioned.