Centre news

Politico covers Sebastian Mack’s paper on greenwashed financial markets

The Jacques Delors Centre’s Senior Policy Fellow calls on EU lawmakers and regulators to improve the rules for sustainable finance to fight greenwashing. 

The EU needs hundreds of billions of euros in additional investments each year if it is to achieve its climate objectives. To align financial flows with sustainable goals, the EU adopted a comprehensive regulatory framework for sustainable finance.  

However, implementation of the new rules has been bumpy. Politico cites from Sebastian Mack’s latest publication that “complex, patchy and inconsistent regulation, a mismatch between scarce green assets and strong demand for sustainable financial products, and greenwashing allegations involving big names in the fund management and ESG rating provider industry, create uncertainty for both issuers and investors”.  

The risk of ‘greenwashing’ — the practice of making misleading claims about the sustainability of a product — is problematic not only for consumers but also for the EU’s climate goals. “Where the regulatory framework fails to ensure certainty for financial market participants, it cannot attract the investment we need for transforming Europe’s economy,” Mack argues.  

To facilitate the application of the framework, it is warranted to simplify and streamline excessive reporting requirements. But Mack warns that cutting red tape “must not endanger the consistency of the disclosure regime.”  

To retain an edge in sustainable finance, the EU should not weaken its legislative framework, but instead strengthen it to ensure that it’s not open to abuse. “Only if Europe manages to make its framework usable and greenwash-proof, will it remain relevant in the global context,” Mack concludes. 

Read the Politico article here. Download Sebastian Mack’s paper “Show greenwashing the red card” here