Transparency for efficiency and financial stability

Need for transparency on climate risks

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Need for transparency on climate risks

Greenwashing is a transparency problem

Published: 3 November 2022

Many consumers and companies are demanding sustainable and green products. This can lead companies to portray certain products as more environmentally friendly than they are, so-called greenwashing. For example, a fund may market itself as environmentally friendly but not invest in green companies to any great extent. Environmental arguments are used in marketing to take advantage of growing consumer interest in the environment. Such types of greenwashing are a problem often discussed around climate transparency.

In some countries, greenwashing has become such a widespread problem that new regulatory and transparency requirements have been developed. In the EU, for example, elements of the Green Taxonomy Regulation have been introduced as part of the EU Action Plan to finance sustainable growth.[16] The Taxonomy Regulation contains rules defining when an economic activity is considered environmentally sustainable. Since last year, the EU Sustainable Finance Disclosure Regulation has also been in force, regulating how fund management companies and financial advisors should disclose sustainability factors. Finansinspektionen, the Swedish Financial Supervisory Authority, has also identified greenwashing as a major risk in the financial sector.[17] Without credible information, there is a risk that green investments will not be made, affecting the climate transition and the development of a sustainable economy. We therefore need to continue to develop clear rules on how companies can classify and market products, and there must be effective supervision and enforcement of the rules.