Marketing communications & Greenwashing: can’t see the wood for the many green trees

AFM policy rule on information provision and the sustainability claims guideline

The Policy Rule provides market participants with better insight into how the AFM applies open standards in its supervision. In the revised Policy Rule, interpretations of these open standards have been updated and new interpretations have been added. These changes are generally neither surprising nor illogical, with many examples of concrete bad practices that the AFM has encountered in its supervision of information provision requirements. 

However, the Policy Rule does not address green or sustainability-related advertising. This is because sustainability in the context of information provision is still a relatively new area in the AFM’s oversight. Consequently, no interpretations on “green” claims have yet been developed, as the Policy Rule compiles previous AFM interpretations. In contrast, the Guideline does not look back but instead provides insight into the AFM’s perspective on sustainability in the context of the information provision standard.

The Guideline offers recommendations for meeting information provision standards concerning sustainability claims. These guidelines are based on three principles: 

• accurate, representative, and up-to-date; 
• specific and well-founded; and 
• understandable, appropriate, and accessible. 

The Guideline also includes examples of both good and bad practices. It is relevant for all financial firms, including those without an explicit sustainability focus. For instance, the AFM warns that visual elements, such as images of rainforests or wind turbines, may be misleading if they do not match actual investment practices, such as investing in palm oil or fossil fuels. Although the Policy Rule does not explicitly address greenwashing or sustainability claims, it is also applicable and relevant to ‘green’ claims, as each claim must comply with the open standards of accuracy, clarity, and non-misleading.

Marketing communications and Greenwashing in the financial sector

At the European level, there are also rules concerning ‘green’ claims’, aimed at preventing greenwashing. 

European regulators define “greenwashing” as:

 A practice where statements, claims, actions, or communications on sustainability do not clearly and honestly reflect the true sustainability of a company, financial product, or financial service. This practice can mislead consumers, investors, or other market participants. 

The regulators have also published four general principles:

• Principle 1: Sustainability claims must be accurate and provide a faithful representation of the overall profile and business model, or the profile of the product(s).
• Principle 2: Sustainability claims must be substantiated. Claims should be backed by clear arguments, facts, and processes.
• Principle 3: Sustainability claims and their substantiation should be accessible, clear, and understandable for the target audience.
• Principle 4: Sustainability claims should be kept up to date, with any material changes disclosed in a timely manner with a clear rationale.

Types of greenwashing that may appear in marketing communications include:

• Misleading communication: providing inaccurate or incomplete information or using vague and unclear terms without concrete substantiation.
• Misleading practices: failing to consider customers’ sustainability preferences and using images or symbols that suggest a greener image than reality. This can also include focusing only on positive sustainability aspects while (intentionally) omitting negative ones.
• Inconsistency: lacking a uniform sustainability strategy within the organisation.
• Incomplete transparency: failing to adequately explain how sustainability claims are substantiated or measured, which may mislead customers regarding the true impact.

Greenwashing can have significant consequences for financial firms, creating unfair competition and undermining trust in the integrity of financial markets. It can also lead to reputational damage for involved organisations, along with fines from the AFM and the Netherlands Authority for Consumers & Markets (ACM). In some cases, companies may also be held liable for misleading claims.

Example of greenwashing

An advertisement promoting an investment fund as one that has a measurable impact on reducing CO₂ emissions, stating that investors make a ‘measurable ecological contribution’ by investing in the fund, without informing potential investors about how the calculation is performed and without clearly and comprehensibly explaining the calculation method.

Accelerated development of the regulatory framework to combat greenwashing

The regulatory framework to prevent greenwashing is fragmented, both at a European and national level. The current regulatory framework is outlined below:

• Unfair Commercial Practices Directive (amended by the Directive on Empowering Consumers for the Green Transition)
• EU Green Claims Directive
• ESG Ratings Regulation
• ESA’s Final Report on Greenwashing
• ESMA Guidelines on the use of ESG and sustainability-related terms in fund names
• Dutch Advertising Code & Code for Sustainability Advertising 
• AFM Sustainability Claims Guideline
• ACM Sustainability Claims Guideline

Marketing departments should be aware that, with the advent of the Green Claims Directive, general environmental claims without recognised, relevant environmental performance will be considered unfair. Such claims will therefore be prohibited in all cases. Examples of generic environmental claims include “environmentally friendly,” “green,” “eco-friendly,” “climate-friendly,” or similar statements that suggest or imply ‘excellent environmental performance’.

Marketing checklist

The absence of a chapter (or at least a paragraph) on greenwashing or a reference to the Sustainability Claims Guideline is, in our opinion, a missed opportunity. The financial sector is ready for clear guidelines that not only emphasise the obligation to provide accurate and transparent information but also highlight the necessity of effectively combating greenwashing. 

Therefore, we have put together a checklist for marketing departments at financial companies. This checklist allows you to easily review all the requirements that your claims must meet. It includes not only sector-specific laws and regulations but also theme-specific topics, including greenwashing. This ensures that marketing communications fully comply with all applicable laws and regulations. 

Want to learn more about the marketing checklist? Feel free to get in touch!