Italy does not have any explicit legal framework dedicated to greenwashing in the financial sector. However, there are general financial law rules under which greenwashing may fall.

A) On the relationship between the intermediary and its clients

In the financial, asset manager and insurance space, greenwashing might be captured by general principles of transparency and fairness in the relationship with the clients. For example:

1. in the investment services space, as expressly pointed out by Consob in the context of a warning published in 2020, greenwashing behaviors may be in contrast with the general obligations to provide the client with correct, clear and not misleading information, also in the context of advertising and promotional communication (see Article 36, of CONSOB’s Intermediaries Regulation No. 20307/2018). This rule has been expressly extended to fund marketing by asset managers. On this basis, Consob has included the contrast of greenwashing among its objectives of the 2022-2024 strategic plan for supervision;
2. in the insurance law, it is provided that insurance distributors must provide policyholders with information that is correct, clear, not misleading, impartial and complete and act with fairness and transparency (see Article 119-bis of the Italian Insurance Code and Article 54 of the IVASS Regulation No. 40/2018).

Any detected breach of the rules mentioned above may trigger the application of administrative sanctions by Consob and/or give rise to private-enforcement actions.

B) On the prudential and risk management rules

We note that the Bank of Italy, in the document named “Expectations of Supervision of Climate and Environmental Risks”, published on April 8, 2022, has recommended to intermediaries consider greenwashing in the context of their risk assessment process, in order to take into account the reputational risks and the subsequent liquidity risks that may arise from false or misleading sustainability related-disclosure at product and entity level.

C) Consumer protection rules and unfair commercial practices

According to the long-standing case law of the Italian Competition Authority (ICA), greenwashing practices may fall under the general prohibition of misleading commercial practices under the Italian Consumer Code, as they are capable of misleading consumers with respect to the eco-friendly features of products/services and lead them to make decisions they would not otherwise have made. Greenwashing may also be captured by the rules on distance marketing of financial services under the Italian Consumer Code, which provide that the information on the financial service that shall be disclosed in the pre-contractual phase shall be clear and understandable, also in light of the fairness and good faith principles.

It should be highlighted that, in 2021, the ICA set up a special working group to analyze the relations between antitrust, consumer protection, and environmental issues - including greenwashing practices.

Violations of the Italian Consumer Code are sanctioned with pecuniary fines which currently may be as high as €5 million. Please note that the maximum limit of the fine will soon be increased to €10 million.

Lastly, it should be pointed out that, pursuant to very recent case law by the Italian civil courts, the dissemination of false and/or unsubstantiated claims concerning the eco-friendly features of a textile product amounted to unfair competition, with the ensuing obligation to pay the damages suffered by the persons harmed by the unfair conduct.

The requirements stemming from financial ordinary law mainly derive from European legislation.
Indeed:

1. as to the investment services space, Article 36 of CONSOB's Intermediary Regulation No. 2030/2018 almost literally transposes the content of Article 24, para. 3, of the EU/2014/65 Directive (MiFID II), according to which "all information, including marketing communications, addressed by the investment firm to clients or potential clients shall be fair, clear and not misleading";
2. as to the insurance space, Article 119-bis of the Italian Insurance Code and Article 54 of the IVASS Regulation No. 40/2018 implement Article 17 of the EU Directive 2016/97 (the IDD), according to which insurance distributors shall always act honestly, fairly and professionally in accordance with the best interests of their customers when providing distribution activities;
3. as to consumer protection rules, the Italian Consumer Code represents the national transposition of various pieces of EU legislation, namely Directive 2002/65/EC, Directive 2005/29/EC, and Directive 2011/83/EU.

In Italy, greenwashing in the financial sector is currently addressed through general sectoral principles and general consumer protection rules, without any green-washing-specific guidance.

We are not aware of other sectors where greenwashing is addressed through specific domestic rules, so that - also for such sectors - general transparency and good faith principles apply.

The Italian legal framework does not provide any definition of greenwashing.

In our view, the most prominent challenges in addressing greenwashing relate to practices that even if formally compliant with the current EU sustainable finance legislation still have the potential to result in greenwashing. We refer, for example, to two practices related to the implementation of SFDR that we have recently encountered in our professional experience and pose, in our view, a critical risk of greenwashing.

The first practice is the use of internal ESG ratings by market participants to select investments to be included in managed portfolios under Article 8 of the SFDR. As known, FDR is neutral in terms of the design of financial products under Article 8 and does not prescribe eligible investing styles, strategies, or methodologies to be used. Therefore, the use of internal ESG ratings to support "best-in-class" strategies is per se permitted. However, these internal ratings are based on self-selected criteria in the absence of regulatory guidance, clear market standards, or benchmarks. In our experience, this can result in parameters that allow for only minimal filtering of investments based on sustainability criteria, so that financial market participants can claim to invest only in high ESG-scoring products, even if such investments fall short of being ESG-friendly.

We are of the view that the main challenge in implementing the existing regulatory framework to address greenwashing within the EU financial/banking sector is the absence of a clear minimum standard to define “sustainability” (see also response to section 1).

For example, the lack of a granular notion of “sustainable investment” and “environmental or social characteristics” under the SFDR allows intermediaries to adopt sustainability frameworks that, de facto, lead the latter to label financial products as “sustainable” also in instances where such products – in practice – positively contribute to sustainability factors in a very limited or negligible way.

Attention Call No. 1/20 of 12 March 2020: https://www.consob.it/web/area-pubblica/bollettino/documenti/bollettino2020/ra_2020_1.htm;

CONSOB's Intermediary Regulation: https://www.consob.it/documents/1912911/1950567/reg_consob_2018_20307.pdf/11dc97e0-da97-7aa9-ce44-45e11f7ff7bb 

Consob's Strategic plan: https://www.consob.it/documents/1912911/1949521/ps_2224.pdf/dcc07424-55f5-d283-8b0a-4d7c8e3e0507; 

Italian Insurance Code: https://www.normattiva.it/atto/caricaDettaglioAtto?atto.dataPubblicazioneGazzetta=2005-10-13&atto.codiceRedazionale=005G0233&atto.articolo.numero=0&atto.articolo.sottoArticolo=1&atto.articolo.sottoArticolo1=10&qId=&tabID=0.6176586628187792&title=lbl.dettaglioAtto;

IVASS Regulation No. 40/2018: https://www.ivass.it/normativa/nazionale/secondaria-ivass/regolamenti/2018/n40/Regolamento_IVASS_40_del_2_agosto_2018.pdf ;

Italian Consumer Code: https://www.normattiva.it/atto/caricaDettaglioAtto?atto.dataPubblicazioneGazzetta=2005-10-08&atto.codiceRedazionale=005G0232&atto.articolo.numero=0&atto.articolo.sottoArticolo=1&atto.articolo.sottoArticolo1=10&qId=3f79af88-4f6e-4f72-9f79-8bcf3779984e&tabID=0.5466817227400131&title=lbl.dettaglioAtto;

Expectations of Supervision of Climate and Environmental Risks: https://www.bancaditalia.it/focus/finanza-sostenibile/vigilanza-bancaria/Aspettative_di_vigilanza_BI_su_ESG.pdf;