ISDA Responds to ESAs Call for Evidence on Greenwashing

On January 10, ISDA submitted its response to the European Supervisory Authorities’ (ESAs) call for evidence on greenwashing. The response highlights that the current regulatory framework provides for an inconsistent treatment of derivatives and an unclear representation of the role of derivatives in sustainability, exposing them to unwarranted claims of greenwashing. It reiterates its call for specific environmental, social and governance (ESG) classification guidelines to be issued for derivatives in order to allow financial institutions to implement their ESG obligations without undue regulatory risks, which could otherwise expose firms selling these products to a significant risk of litigation and reputational damage. ISDA further points to the lack of clarity around regulations and methodologies as one major cause of greenwashing. It also elaborates on the structure of sustainability-linked derivatives (SLDs) and ISDA’s related work to encourage adequate disclosure of how SLDs help attain sustainability objectives, therefore supporting the integrity of this developing market.

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