Sustainable Finance
Regulatory Update
Integrity is a concept which underpins the efficient operation of loan markets globally. And integrity really matters when we talk about sustainability generally, and sustainable finance in particular.
The UK Financial Conduct Authority, for example, recently cited a survey in which 81% of respondents said they would like their investments to do some good as well as provide a financial return.1
It was with a view to ensuring the integrity of sustainable finance products globally that we first became involved in developing the Green, Social and Sustainability-Linked Loan Principles (the Principles). Since the development of the Principles, however, there have been concerns about greenwashing across all sectors, including the financial sector. According to the recent European Banking Authority Report on greenwashing, alleged greenwashing cases in the EU financial sector increased significantly up to 2022 (with around 206 cases reported in 2022 against 40 in 2018) and continued to grow in 2023 (with a 13.6% increase compared to 2022).2
Our Horizons regulatory tracker – Sustainability Assembled – looks at how greenwashing concerns have shaped the regulatory agenda in Q2 2024 and sets out some of the key implications of recent regulatory developments for market participants looking to mitigate greenwashing risks, particularly in relation to sustainability-linked loans.
Other key regulatory developments covered in Sustainability Assembled include the release of the European Supervisory Authorities Joint Opinion on the Sustainable Finance Disclosure Regulation, the LMA’s response to the Transition Finance Market Review’s Call for Evidence, the adoption of the Corporate Sustainability Due Diligence Directive and the publication of new implementation guidance relating to the European Sustainability Reporting Standards.
The LMA is looking to undertake work on a new insights paper which will explore the impacts of greenwashing risk in relation to sustainable lending. We would like to hear from you with your views! Please do contact me if you would be happy to speak with us (all responses will be anonymised) and/or if you would be interested in joining our dedicated Sustainable Finance Regulation Committee.
Hannah Vanstone
Sustainable Finance Regulation Lead, LMA
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