Greenwashing in the EU Financial Sector |
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Spain |
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(Europe)
Firm
Uría Menéndez
Contributors
Eduardo Geli |
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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,... | Spain does not have an explicit legal framework dedicated to identifying, addressing and sanctioning greenwashing in the financial sector. However, financial law provides for sectorial and general provisions under which greenwashing may fall, such as article 208 of the Royal Legislative Decree 4/2015, of 23 October, approving the revised text of the Securities Market Law (“LMV”) which provides that investment service companies are required to act “honesty, impartiality and professionally, in the best interests of its clients”. The Spanish Securities and Market Authority (“CNMV”) may use the penalties associated with the breach of these obligations to address potential false or non-effective sustainability related-claims at the product and entity level and, under its powers in article 234 of the LMV, which allows the CNMV to take all necessary measures to ensure that the public is adequately informed, including by correcting false or misleading information published, and by requesting the issuer or other person who has published or disseminated false or misleading information to publish a rectification. A similar regulation is provided for asset management companies which, in the conduct of their business, and in accordance with article 59 of Law 22/2014, of 12 November must operate “honestly, with due skill, care and diligence and with loyalty”. In that respect, the CNMV and the Bank of Spain have issued specific guidelines on the advertising of investment products and services; in particular, Circular 2/2020, of 28 October and Circular 4/2020, of 26 June, respectively, which establish that the advertising of products and services shall be “clear, balanced, objective and not misleading”. In addition, Circular 2/2020, of 28 October of the CNMV establishes that credit institutions and investment firms —among others—, when advertising financial products or services, shall “avoid creating disproportionate or false impressions or expectations that operate as an inducement to purchase the product or service or a misrepresentation as to the characteristics or duration of the advertised offer”. Any breach of such requirements may lead to the corrective actions provided in the law, the imposition of an administrative sanction by the CNMV or the Bank of Spain and/or give rise to private-enforcement actions. In any case, advertising on financial companies and products must also comply with the general regulations on advertising and unfair competition which are the following:
Finally, the Ministry of Environment and Rural and Marine Affairs, the Association for the Self-Regulation of Commercial Communication and specific large companies from the energy and automotive sectors signed an agreement on the use of environmental arguments in advertising, a Code of Good Practice which establishes a set of rules that guide companies in the development, execution and dissemination of advertising messages that include environmental arguments. This is complemented by the Decalogue published in 2022 with recommendations regarding climate change communication and in the context of the ecological transition. However, the Code of Good Practice and the Decalogue are not binding legal instruments. |
| Is the relevant legal framework based on the EU or on the national legislation? | Not applicable. |
| Is greenwashing, which may occur in the financial sector, addressed specifically and/or any differently from greenwashing in other sectors? | 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, as already mentioned above, the Bank of Spain and the CNMV have issued specific guidelines on good practices in terms of transparency, balance of information and proportionality of arguments in advertising communications in relation to financial products or services. Moreover, Law 3/1991, of 10 January, on Unfair Competition was modified in order to adjust it to Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market (“Unfair Commercial Practices Directive”). Finally, it must be noted that the Guidance on the Interpretation and Application of Directive 2005/29/EC of the European Parliament and of the Council Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market [2021/C 526/01], which includes a specific section dedicated to greenwashing (section 4.1), is used to construe Law 3/1991, of 10 January, on Unfair Competition —given that it was modified in accordance with the Unfair Commercial Practices Directive. |
| Does the current legal framework provide a definition of greenwashing? If yes, how it is defined, is the definition regulatory-binding? | The national legal framework does not provide a definition of greenwashing. Greenwashing in the financial sector, in a broad sense, is currently addressed through sectorial and ordinary provisions. The only general and transversal prohibition that applies today, across all sectors, including the financial sector, is the prohibitions laid down by the General Advertising Law and the Unfair Competition Law.
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| 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... | Not applicable. |
| Are there any relevant links to national legislation and/or guidance? | Law 3/1991 of 10 January 1991 on Unfair Competition: https://www.boe.es/buscar/act.php?id=BOE-A-1991-628 Law 34/1988 of 11 November 1988 on General Advertising: https://www.boe.es/buscar/act.php?id=BOE-A-1988-26156 Order EHA/1717/2010, of 11 June, on the Regulation and Control of the Advertising of Investment Services and Products: https://www.boe.es/buscar/act.php?id=BOE-A-2010-10314 Royal Legislative Decree 4/2015, of 23 October, Approving the Revised Text of the Securities Market Law: https://www.boe.es/buscar/act.php?id=BOE-A-2015-11435 Law 22/2014 of 12 November 2014 Regulating Venture Capital Companies, Other Closed-End Collective Investment Undertakings and Management Companies of Closed-end Collective Investment Undertakings, and Amending Law 35/2003 of 4 November 2003 on Collective Investment Undertakings: https://www.boe.es/buscar/act.php?id=BOE-A-2014-11714 Circular 2/2020, of 28 October, of the National Securities Market Commission (CNMV), on the Advertising of Investment Products and Services: https://www.boe.es/buscar/act.php?id=BOE-A-2020-14107 Circular 4/2020, of 26 June, of the Bank of Spain, on the Advertising of Banking Products and Services: https://www.boe.es/buscar/act.php?id=BOE-A-2020-7869 |
Greenwashing in the EU Financial Sector
Spain does not have an explicit legal framework dedicated to identifying, addressing and sanctioning greenwashing in the financial sector.
However, financial law provides for sectorial and general provisions under which greenwashing may fall, such as article 208 of the Royal Legislative Decree 4/2015, of 23 October, approving the revised text of the Securities Market Law (“LMV”) which provides that investment service companies are required to act “honesty, impartiality and professionally, in the best interests of its clients”. The Spanish Securities and Market Authority (“CNMV”) may use the penalties associated with the breach of these obligations to address potential false or non-effective sustainability related-claims at the product and entity level and, under its powers in article 234 of the LMV, which allows the CNMV to take all necessary measures to ensure that the public is adequately informed, including by correcting false or misleading information published, and by requesting the issuer or other person who has published or disseminated false or misleading information to publish a rectification. A similar regulation is provided for asset management companies which, in the conduct of their business, and in accordance with article 59 of Law 22/2014, of 12 November must operate “honestly, with due skill, care and diligence and with loyalty”. In that respect, the CNMV and the Bank of Spain have issued specific guidelines on the advertising of investment products and services; in particular, Circular 2/2020, of 28 October and Circular 4/2020, of 26 June, respectively, which establish that the advertising of products and services shall be “clear, balanced, objective and not misleading”. In addition, Circular 2/2020, of 28 October of the CNMV establishes that credit institutions and investment firms —among others—, when advertising financial products or services, shall “avoid creating disproportionate or false impressions or expectations that operate as an inducement to purchase the product or service or a misrepresentation as to the characteristics or duration of the advertised offer”. Any breach of such requirements may lead to the corrective actions provided in the law, the imposition of an administrative sanction by the CNMV or the Bank of Spain and/or give rise to private-enforcement actions.
In any case, advertising on financial companies and products must also comply with the general regulations on advertising and unfair competition which are the following:
- Articles 3. e) and 6 of Law 34/1998, of 11 November, on general advertising which penalizes “misleading advertising”.
- Orden EHA/1717/2010, of 11 June, on the regulation and control of the advertising of investment services and products.
- Articles 4 and 5 of Law 3/1991, of 10 January, on unfair competition, provide that any advertising which may be misleading to the public or contrary to the principles of good faith is illegal advertising.
Finally, the Ministry of Environment and Rural and Marine Affairs, the Association for the Self-Regulation of Commercial Communication and specific large companies from the energy and automotive sectors signed an agreement on the use of environmental arguments in advertising, a Code of Good Practice which establishes a set of rules that guide companies in the development, execution and dissemination of advertising messages that include environmental arguments. This is complemented by the Decalogue published in 2022 with recommendations regarding climate change communication and in the context of the ecological transition. However, the Code of Good Practice and the Decalogue are not binding legal instruments.
Not applicable.
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, as already mentioned above, the Bank of Spain and the CNMV have issued specific guidelines on good practices in terms of transparency, balance of information and proportionality of arguments in advertising communications in relation to financial products or services.
Moreover, Law 3/1991, of 10 January, on Unfair Competition was modified in order to adjust it to Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market (“Unfair Commercial Practices Directive”).
Finally, it must be noted that the Guidance on the Interpretation and Application of Directive 2005/29/EC of the European Parliament and of the Council Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market [2021/C 526/01], which includes a specific section dedicated to greenwashing (section 4.1), is used to construe Law 3/1991, of 10 January, on Unfair Competition —given that it was modified in accordance with the Unfair Commercial Practices Directive.
The national legal framework does not provide a definition of greenwashing. Greenwashing in the financial sector, in a broad sense, is currently addressed through sectorial and ordinary provisions.
The only general and transversal prohibition that applies today, across all sectors, including the financial sector, is the prohibitions laid down by the General Advertising Law and the Unfair Competition Law.
Not applicable.
Law 3/1991 of 10 January 1991 on Unfair Competition: https://www.boe.es/buscar/act.php?id=BOE-A-1991-628
Law 34/1988 of 11 November 1988 on General Advertising: https://www.boe.es/buscar/act.php?id=BOE-A-1988-26156
Order EHA/1717/2010, of 11 June, on the Regulation and Control of the Advertising of Investment Services and Products: https://www.boe.es/buscar/act.php?id=BOE-A-2010-10314
Royal Legislative Decree 4/2015, of 23 October, Approving the Revised Text of the Securities Market Law: https://www.boe.es/buscar/act.php?id=BOE-A-2015-11435
Law 22/2014 of 12 November 2014 Regulating Venture Capital Companies, Other Closed-End Collective Investment Undertakings and Management Companies of Closed-end Collective Investment Undertakings, and Amending Law 35/2003 of 4 November 2003 on Collective Investment Undertakings: https://www.boe.es/buscar/act.php?id=BOE-A-2014-11714
Circular 2/2020, of 28 October, of the National Securities Market Commission (CNMV), on the Advertising of Investment Products and Services: https://www.boe.es/buscar/act.php?id=BOE-A-2020-14107
Circular 4/2020, of 26 June, of the Bank of Spain, on the Advertising of Banking Products and Services: https://www.boe.es/buscar/act.php?id=BOE-A-2020-7869