Denmark’s Financial Supervisory Authority (FSA) has set up a unit to monitor investors’ sustainability disclosures under new EU rules and to combat greenwashing, according to local media reports.
The Sustainable Finance Disclosure Regulation (SFDR) came into force last week, requiring asset managers and other investment providers in the EU to provide information about how sustainability risks are integrated into their investment processes and remuneration policies, as well as individual products. Any firm that considers such risks immaterial will be asked to justify that standpoint.
According to FinansWatch, the new unit from Finanstilsynet will have powers to issue injunctions, warning notices and police reports – in selected cases – to companies that do not comply with the SFDR – although the regulator is reported to have said that it will exercise leniency in the initial period. It is understood the body will comprise four people, although the regulator has not disclosed their names.
"This is a new area,” said FSA Deputy Director and sustainability head Theodor Christensen. “But it doesn't mean it's okay for companies to attempt to shirk regulations and market products as sustainable if these are in regulatory noncompliance. We will take hard measures against greenwashing when a product marketed as greener than it actually is.”
In addition to the SFDR’s newly implemented principles-based disclosure rules, more granular requirements are due to come into force under the regulation in 2022 which will see financial institutions report the sustainability performance of their investments against 18 mandatory indicators.
The move from the Danish FSA is the latest indication that combating greenwash is fast becoming a key regulatory priority. Earlier this month, the US Securities Exchange Commission announced the creation of a task force to identify “ESG-related misconduct” and there have been reports indicating that the Japanese Financial Services Agency is considering measures to prevent firms from exaggerating the sustainability performance of their funds.
Investors are also increasingly critical of investment products which are perceived as falling short of their stated sustainability credentials. In recent weeks, German banking heavyweight DekaBank, data provider Refinitiv and former Bank of England governor Mark Carney have faced backlash over claims made regarding product sustainability performance.
RI has requested comment from Finanstilsynet.