Greenwashing in the EU Financial Sector |
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Czech Republic |
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(Europe)
Firm
PRK Partners
Contributors
Jan Kohout |
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| Does your jurisdiction have an explicit legal framework to identify, address and sanction greenwashing in the financial sector? If yes, is it enacted in a specialized law or addressed by other regulations (advertising law, consumer protection law,... | There is no legal framework per se in the Czech Republic at the moment. Czech Republic has some partial regulations that might be used to sanction greenwashing, such as the local implementation of DELEGATED DIRECTIVE (EU) 2021/1270, amending Directive 2010/43/EU as regards the sustainability risks and sustainability factors to be taken into account for Undertakings for Collective Investment in Transferable Securities (UCITS), or partial implementation of SFDR in relation to investment instruments, however, there is no comprehensive framework to define and regulate greenwashing as of today. Similarly to France, there is also a standing prohibition to use unclear, untrue, misleading or false information in communication with clients, which is explicitly set in:
Last, but not least, institutions subject to the current NFRD Reporting Framework can be already liable for failure to provide fair non-financial reports. |
| Is the relevant legal framework based on the EU or on the national legislation? | As indicated above, the clauses that could be used to sanction greenwashing are generally broader interpretations of the general obligations of EU law regulating the fair treatment of clients of financial institutions. |
| Is greenwashing, which may occur in the financial sector, addressed specifically and/or any differently from greenwashing in other sectors? | Due to the fact that the clauses related to sanctioning greenwashing are very broad and general in nature, it can be concluded that at this time the regulation of greenwashing does not materially differ from e.g. general regulation of misleading commercial practices in consumer law. |
| Does the current legal framework provide a definition of greenwashing? If yes, how it is defined, is the definition regulatory-binding? | There is no definition of greenwashing in the Czech legal system as of today. |
| What are the main challenges legal experts see in addressing greenwashing in the EU financial/banking sector and what are the main challenges in implementing the existing regulatory framework to address greenwashing within the EU financial/banking... | New, still developing legislation, where the framework obligations are already set and effective (or become effective within the upcoming months or years), and yet the technical standards, guidelines or advice are not in place yet (the case of both CSRD and SFDR). This unreliability of what is (or shortly will be) expected from all participants makes the preparation and implementation time and resources expensive, as well as prone to decisions that will not qualify as sufficiently sustainable in a few months or years. According to our estimate, the fact that the long-term decisions are being done in a highly uncertain and volatile environment and under artificial stress might become a significant cause for practices that will be seen as greenwashing in the future. |
| Are there any relevant links to national legislation and/or guidance? | Misleading Commercial Practices: https://www.cnb.cz/en/faq/Misleading-commercial-practices Unfair Commercial Practices: https://www.cnb.cz/en/supervision-financial-market/consumer-protection-and-financial-literacy/consumer-protection/unfair-commercial-practices/
Justification of the decree amending Decree No. 244/2013: https://www.cnb.cz/export/sites/cnb/cs/legislativa/.galleries/leg_kapitalovy_trh/vyhlasky/vyhlaska_184_2022_oduvodneni.pdf Act No. 256/2004 Coll.: https://www.mfcr.cz/cs/legislativa/legislativni-dokumenty/2004/zakon-c-256-2004-sb-3568 New English translation of the Act on Management Companies and Investment Funds: https://www.mfcr.cz/en/themes/capital-market/capital-market-in-the-czech-republic/new-english-translation-of-the-act-on-ma-38401 |
Greenwashing in the EU Financial Sector
There is no legal framework per se in the Czech Republic at the moment. Czech Republic has some partial regulations that might be used to sanction greenwashing, such as the local implementation of DELEGATED DIRECTIVE (EU) 2021/1270, amending Directive 2010/43/EU as regards the sustainability risks and sustainability factors to be taken into account for Undertakings for Collective Investment in Transferable Securities (UCITS), or partial implementation of SFDR in relation to investment instruments, however, there is no comprehensive framework to define and regulate greenwashing as of today.
Similarly to France, there is also a standing prohibition to use unclear, untrue, misleading or false information in communication with clients, which is explicitly set in:
- local MiFID II Implementation;
- local UCITS Implementation;
- local IDD Implementation;
- local Pension Funds Regulation; and
- local CCD Implementation (albeit there is no significant greenwashing risk).
Last, but not least, institutions subject to the current NFRD Reporting Framework can be already liable for failure to provide fair non-financial reports.
As indicated above, the clauses that could be used to sanction greenwashing are generally broader interpretations of the general obligations of EU law regulating the fair treatment of clients of financial institutions.
Due to the fact that the clauses related to sanctioning greenwashing are very broad and general in nature, it can be concluded that at this time the regulation of greenwashing does not materially differ from e.g. general regulation of misleading commercial practices in consumer law.
There is no definition of greenwashing in the Czech legal system as of today.
New, still developing legislation, where the framework obligations are already set and effective (or become effective within the upcoming months or years), and yet the technical standards, guidelines or advice are not in place yet (the case of both CSRD and SFDR). This unreliability of what is (or shortly will be) expected from all participants makes the preparation and implementation time and resources expensive, as well as prone to decisions that will not qualify as sufficiently sustainable in a few months or years. According to our estimate, the fact that the long-term decisions are being done in a highly uncertain and volatile environment and under artificial stress might become a significant cause for practices that will be seen as greenwashing in the future.
Misleading Commercial Practices: https://www.cnb.cz/en/faq/Misleading-commercial-practices
Unfair Commercial Practices: https://www.cnb.cz/en/supervision-financial-market/consumer-protection-and-financial-literacy/consumer-protection/unfair-commercial-practices/
Justification of the decree amending Decree No. 244/2013: https://www.cnb.cz/export/sites/cnb/cs/legislativa/.galleries/leg_kapitalovy_trh/vyhlasky/vyhlaska_184_2022_oduvodneni.pdf
Act No. 256/2004 Coll.: https://www.mfcr.cz/cs/legislativa/legislativni-dokumenty/2004/zakon-c-256-2004-sb-3568
New English translation of the Act on Management Companies and Investment Funds: https://www.mfcr.cz/en/themes/capital-market/capital-market-in-the-czech-republic/new-english-translation-of-the-act-on-ma-38401