The European Commission must act swiftly to stop greenwashing in financial markets – the S&Ds have urged ahead of today’s debate on practices of sustainable investment funds at the European Parliament’s plenary session in Strasbourg. 

The debate comes after an investigation by 11 major European news outlets found investments in fossil fuels, and other highly polluting activities, at almost half of Europe's greenest funds. This led to calls for stricter enforcement of the existing rules, but also for a strengthening of the rules regulating sustainable funds.

Paul Tang, MEP and rapporteur on EU legislation on sustainable finance disclosure, said:

“People want their investments not just to do well, but also to do good. For the people and the planet. That is why they are increasingly investing in sustainable funds, even when these offer lower returns. When these funds end up not being sustainable at all, they feel robbed; and rightly so.

“When European news outlets discovered that 50% of Europe's most sustainable funds invest in dirty assets, it came as a shock, but not as a surprise. We know that our rules are not enough. Transparency alone will not end greenwashing. We need minimum standards for Europe's most sustainable funds to prevent investments in harmful activities – and to ensure that those investments that are not yet green have clear transition plans. Sustainability is not just about being green, but also about becoming green.

“Today we call on the Commission to leap into action. Fund managers want clarity as to what makes funds green. Investors want to be sure that if they choose to do good with their money, their money will in fact do good. By delaying action, the Commission is disappointing both of them. To the detriment of our planet.”

Jonás Fernández, MEP and S&D spokesperson on economic and monetary affairs, added: 

“Greenwashing continues to be a major problem among EU financial market participants. Adequate minimum requirements should be introduced to avoid funds labelling themselves as green, while still funding unsustainable activities.

“In its strategy for financing the transition to a sustainable economy, published in June 2021, the European Commission already promised that it would consider introducing minimum sustainability criteria for products covered by the sustainable finance disclosure regulation. However, it has not yet come forth with any clear roadmap on when or how it intends to address this point.

“That is why we are today calling on the Commission to deliver on its promise. Five years after the introduction of the sustainable finance action plan, the Commission should finally ensure that that greenwashing practices come to an end.”