France does not have any explicit legal framework dedicated to identifying, addressing and sanctioning greenwashing in the financial sector. However, financial ordinary law provides for general and sectorial provisions under which greenwashing may fall. For instance, in the area of collective asset management the requirements upon asset management companies to act “honestly, with due skill, care and diligence and fairly in conducting their activities” and “in the best interests of the investors” might be used by the French Securities and Market Authority (AMF) to address potential false or non-effective sustainability related-claims at product and entity level. Furthermore, it is worth mentioning the qualitative requirements imposed on information, including promotional communications, provided by asset management companies to investors, which shall be "accurate, clear and not misleading". In that respect, the AMF has issued specific guidelines to address potential greenwashing which aims at governing the information provided by collective investment schemes incorporating non-financial approaches (see AMF Position-Recommendation DOC-2020-03). Any breach of such requirements may lead to the imposition of an administrative sanction by the AMF and/or give rise to private-enforcement actions.

Similar duty of care and information-based requirements are also provided for investment services and insurance product distribution areas (See ACPR's Recommendation 2022-R-02).

Along with the financial ordinary law provisions, consumer protection law may also capture greenwashing with the prohibition of unfair business-to-consumer commercial practices. In that respect, Law n°2021-1104 of 22 August 2021 has completed the framework of misleading commercial practices to specifically target communications likely to mislead the consumer on any environmental impact of a product or service as well as on professional's commitments in environmental matters. Any breach of such consumer law provisions may lead to the imposition of criminal sanctions and/or give rise to private-enforcement actions.

The requirements stemming from financial ordinary law mainly derive from European legislation (in particular from Directive 2011/61/EU of 8 June 2011 on Alternative Investment Fund Managers and Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities).

However, guidelines are issued by the national regulators on the basis of consultations and work carried out at the national level. In that respect, as already mentioned above, the AMF has issued specific guidelines to govern the information provided by asset management companies when the latter incorporate non-financial approaches. It is also worth noting that the French Prudential Supervision and Resolution Authority - the ACPR - (i.e. the regulator for the banking and insurance sectors) has recently issued new guidelines on good practices in terms of transparency and balance of information and the proportionality of arguments put forward in advertising communications for unit-linked life insurance products.

In addition, although the prohibition of unfair business-to-consumer commercial practices is derived from the Directive 2005/29 of 11 May 2005, the above-mentioned law n°2021-1104 of 22 August 2021 which targets greenwashing specifically is a national piece of legislation, specified that the European Commission's proposal to amend Directive 2005/29/EC to target more specifically environmental claims is still under discussion.

Greenwashing in the financial sector, in a broad sense, is currently addressed through sectorial and ordinary provisions, completed by guidelines issued by the regulators (ACPR and AMF).

The only general and transversal prohibition that applies today, across all sectors, including the financial sector, is the prohibition laid down by consumer law.

There is no general definition of greenwashing under French law. However, the French Consumer Code provides for a binding definition of environmentally misleading commercial practices.

Pursuant to article L.121-2 of the French Consumer Code, a commercial practice is deemed misleading in particular when it is based on false or misleading allegations, indications or presentations concerning the scope of the advertiser's commitments, in particular with regard to the environment, or the nature, process or motive for the sale or provision of the service.

Regarding the main challenges and shortcomings faced today in addressing greenwashing in the EU financial sector, we see the three following core issues: i) legal uncertainty on applicable rules, ii) lack of ESG data regulation, and iii) lack of greenwashing definition.

Legal uncertainty on applicable rules: This is the case for key notions (such as the concept of sustainability) found across the several regulations and directives - a patchwork of regulations, but which are not fully aligned. This makes it difficult for market participants to understand applicable regulations and to ensure regulatory compliance.

A key challenge relates to the need to address the ambiguities about the objectives of the regulations/directives - investors, financial intermediaries and issuers may have different views on the "why" of these regulations and how to better understand the applicable requirements. (For instance, SFDR was designed as a transparency regime for financial entities and products, yet in practice it introduces categorization for financial market participants, which can be misinterpreted by investors as though as a guarantee that they are participating in the financing of a more sustainable European economy.).

Lack of ESG Data Regulation: Data and transparency are key and the cornerstone of ESG assessment and, as such, of the fight against greenwashing. The role of ESG data providers – and in a more broad sense, of the entire rating services ecosystem – is therefore particularly crucial. Yet several areas pertaining to the provision of ESG data are unregulated. Financial institutions will remain dependent to a large extent on the data which they are provided. It could become a challenge if financial institutions were held liable in respect of data.

One of the main challenges to address and prevent greenwashing will be to address such gap by providing a new piece of legislation addressing ESG data, ratings and services and including, for instance, some transparency requirements on methodologies, the underlying data used (source and nature), and the objectives of the products (notably risk or impact) offered by such providers. (cf. AMF’s call for regulation of such services at the European level: https://www.amf-france.org/en/news-publications/news/amf-reiterates-its-call-european-regulation-esg-data-ratings-and-related-services)

Lack of Greenwashing Definition: The lack of greenwashing definition that would enable a distinction between omission and commission, and that would factor in the intentional nature of an infringement.

Both Financial and Banking Regulators (AMF and ACPR) are legally provided with investigation and enforcement powers to identify, detect and sanction greenwashing activities on the basis of the financial and banking ordinary provisions (for instance, see art. L.621-15 of the French Code monétaire et financier regarding the AMF sanction power).

AMF Position-Recommendation DOC-2020-03: https://www.amf-france.org/en/regulation/policy/doc-2020-03 

ACPR's Recommendation 2022-R-02 (FR): https://acpr.banque-france.fr/sites/default/files/media/2022/12/28/20221228_recommandation_2022-r-02.pdf 

Law n°2021-1104 of 22 August 2021 (FR): https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000043956924 

Article L.121-2 of the French Consumer Code (FR): https://www.legifrance.gouv.fr/codes/article_lc/LEGIARTI000044563114