Date: 5th January 2023

According to the European Securities and Markets Authority’s (ESMA) recent study on the EU Eco-label awarded to green retail financial products and services, only 16 funds out of a sample of 3000 meet the proposed minimum portfolio greenness threshold of 50% and exclusion requirements. In view of these findings, the supervisor has suggested loosening requirements in order to increase the number of sustainable investment products eligible for an Ecolabel.

Such a relaxation of the requirements though may very well be counterproductive and to the detriment of the sustainable finance ecosystem as well as its users since it potentially increases the risk of greenwashing.

Another issue with ESMA’s research is the fact that it only considers taxonomy and exclusion-based approaches and entirely omits engagement strategies, thus skewing the findings of the study.

BETTER FINANCE is of the view that there are significant limitations to taxonomy and exclusion-based approaches and invites the supervisory authority to consider engagement and the effect this may have on the number of eligible (sustainable) funds, instead of loosening requirements and thereby encouraging greenwashing practices.