EU sustainable finance rules lack standardization, exposing investors to misleading claims. Consob urges stronger consumer protections and legal accountability.
The European Union is ramping up efforts to tackle greenwashing risk, introducing an unprecedented wave of regulations in recent years. But while the volume of new laws is high, is their quality up to par?
One key issue remains: lack of standardization and consistency across regulatory measures. Without clearer rules, identifying greenwashing remains difficult, leaving consumers vulnerable. This is the central concern raised in a new Consob report, “Greenwashing and consumer protection for a sustainable economy.”
Clear standards needed to combat greenwashing risk
The report highlights the urgent need for clear, uniform standards to prevent misleading sustainability claims. The main challenges?
One of the biggest concerns is the absence of unified methodologies for evaluating sustainability, leading to inconsistencies in ESG ratings and undermining investor trust. The financial regulatory framework remains fragmented, with stricter transparency obligations for some market players than others.
Additionally, corporate executives and regulatory bodies must play a stronger role in ensuring transparency and accountability in sustainability disclosures.
Strengthening consumer protections against greenwashing
Another priority outlined by Consob is enhancing consumer protection, particularly for retail investors who may struggle to navigate complex sustainability claims. Misleading green statements distort markets and disadvantage less sophisticated investors.
Examining the EU’s latest regulatory efforts, such as directive (EU) 2024/825 (also known as the green claims directive), Consob identifies key weaknesses:
- lack of harmonization in ESG evaluation criteria across different rating agencies
- difficulty in verifying corporate sustainability claims
- absence of truly deterrent sanctions for misleading statements
To address these gaps, Consob calls for stronger legal frameworks ensuring standardization and enforcement. One of its most significant proposals? allowing collective actions against companies that make false or misleading green claims, ensuring they are held legally accountable.
