Europe’s national insurance supervisors say that they need sharper teeth and more resource to tackle the growing challenge of greenwashing in the insurance and pensions sector, according to the European Insurance and Occupational Pensions Authority (Eiopa).
Eiopa, along with the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), has published a progress report on greenwashing that suggests supervisors need more resource and a sharper regulatory lead from the European Union to rise to the challenge.
The European Supervisory Authorities said they understand greenwashing “as 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,” they added.
Focusing on the insurance and pensions sector, Eiopa said it finds that greenwashing can manifest as part of broader conduct risks at all stages of the insurance lifecycle.
The supervisory authority said it is important that adequate supervision is in place to tackle greenwashing. “Conscious of this, Eiopa and its National Competent Authorities (NCAs) have started to integrate greenwashing in their supervisory activities,” it explained.
Eiopa said that while its NCAs reported a total of 22 full-time equivalent staff solely dedicated to sustainability-related supervisory tasks in the insurance and pension sector, only ten NCAs believe they have sufficient resources and expertise to tackle greenwashing. Meanwhile 17 NCAs believe they have insufficient resource.
Three NCAs reported having identified one or more instances of greenwashing in their market; five NCAs are currently investigating potential greenwashing.
A further 21 NCAs said they haven’t come across any greenwashing due to “resource constraints, low supply of products with sustainability features, and because the relevant sustainable finance requirements are new or not fully in force”.
Eiopa said that a number of NCAs have carried out supervisory activities aimed at tackling greenwashing – 13 to prevent greenwashing and 11 to identify, mitigate, and investigate greenwashing.
“Most NCAs reported believing that the current and forthcoming supervisory mandates, powers, obligations and toolkits allow them to sufficiently prevent greenwashing (20 NCAs) and identify, monitor and investigate greenwashing (19 NCAs). However, 23 NCAs noted that some data or tools may be missing,” it said.
“Some insurance and pensions providers are also setting up governance processes to prevent and monitor greenwashing. Finally, greenwashing can also be tackled in part by ensuring that consumers understand, at an adequate level, sustainability aspects and documentation,” added Eiopa.
It also said that the overall supervisory framework needs to be beefed up, and will make recommendations on this within next year’s report.
“While the European Union has been at the forefront in setting up a regulatory framework tackling greenwashing, there are a number of shortcomings, inconsistencies and gaps in the framework, highlighted by feedback received in the context of Eiopa’s various data-gathering exercises,” it said.