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[null,"Prepared By:","Contributors:"]
[null,"Ganado Advocates","Conrad Portanier"]
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[]
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["Greenwashing in the EU Financial Sector"]
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["Report Generated: 5/1/2025"]
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["View your report results on next tab"]

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["Question","Malta"]
["EBA Greenwashing Report"]
["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, anti-unfair competition law…)?","Malta does not have any explicit legal framework dedicated to identifying, addressing and sanctioning greenwashing in the financial sector.\nThe \nMFSA's Conduct of Business Rules (the “\nCOB Rules”) become relevant also in respect of insurance undertakings and insurance intermediaries that provide advice in respect of insurance-based investment products. In fact, \nRule 4.4.92 of the COB Rules provides that when providing advice on an insurance-based product in accordance with \nRule 4.4.85, a regulated person is not to make a recommendation where none of the products are suitable for the client. Therefore, in order to prevent misselling and greenwashing: (a) a regulated person is not to recommend insurance-based investment products as meeting a client’s sustainability preferences where those insurance-based investment products do not meet those preferences (here the regulated person is required to explain to the client the reasons for not doing so and is to keep records of those reasons); and (b) where no insurance-based investment product meets the sustainability preferences of the client, and the client decides to adapt his or her sustainability preferences, the regulated person shall keep records of the decision of the client, including the reasons for that decision. Similar concepts in relation to suitability also apply to investment firms when providing portfolio management and/or investment advice.\nGuidance 4.4.100 of the\n COB Rules further specifies that, for the avoidance of doubt, with respect to \nRule .4.4.92 (referred to above), it is to be noted that: (a) insurance-based investment products that are not eligible for individual sustainability preferences can still be recommended by the regulated person, but not as products meeting individual sustainability preferences; (b) in order to allow for further recommendations to clients, where insurance-based investment products do not meet a client’s sustainability preferences, the client is to have the possibility to decide whether to adapt information on his or her sustainability preferences, or not. However, in order to prevent misselling and greenwashing, the regulated person shall keep records of the client’s decision along with the client’s explanation supporting the said adaptation.\nIn addition, consumer protection under the \nConsumer Affairs Act, Cap 378 of \nthe Laws of Malta (the “Consumer Affairs Act”) may capture greenwashing under the prohibitions on misleading commercial practices which includes practices in the financial services sector. Although there is no specific reference to greenwashing or to the consumer being misled as regards any environmental impact of a product or service or the trader’s commitments in environmental matters, in terms of \nArticle 51C, a commercial practice is considered to be misleading if “it contains false information”. It is also considered misleading, amongst others, if:\n“(b) in any way, including its overall presentation, deceives or is likely to deceive the average consumer, even if\n\nthe information is factually correct, in relation to one or more of the following elements, and in either case\n\ncauses or is likely to cause him to take a transactional decision that he would not have taken otherwise:\n\n(i) the existence or nature of the product;\n\n(ii) the main characteristics of the product, such as its availability, benefits, risks, execution, composition, method and date of manufacture or provision, delivery, specification, geographical or commercial origin or the results to be expected from its use, or the results and main features of tests or checks carried out on the product;\nIn terms of \nArticle 51B(4), the \nFirst Schedule of the Consumer Affairs Act also sets out an exhaustive list of commercial practices which are \nipso iure unfair. None of these refer specifically to greenwashing. However, there are certain practices which may by analogy and subject to the facts of the case, possibly be widened to include greenwashing, namely, the practice of “2. Displaying a trust mark, quality mark or equivalent without having obtained the necessary authorization” or “4. Claiming that a trader, including his commercial practices, or a product has been approved, endorsed or authorized by a public or private body when he has not, or making such a claim without complying with the terms of the approval, endorsement or authorization.” \nArticle 51I states that these provisions (including on misleading commercial practices) are without prejudice to any requirement imposed by any other law, in the field of financial services, which is more restrictive or prescriptive than the requirements imposed by these provisions.\nAny infringement of such consumer law provisions may lead to the imposition of penalties by the Civil Courts, without prejudice to consumers to pursue other civil remedies in court.\n"]
["Is the relevant legal framework based on the EU or on the national legislation?"," The requirements relating to financial services legislation is mainly derived from EU legislation, particularly the following: \n \n Directive 2011/61/EU of 8 June 2011 on Alternative Investment Fund Managers; \n 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); \n Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments; and \n Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments. \n \n Any guidance is issued by the MFSA following consultation and work carried out at the national level together with all stakeholders concerned. We are hopeful that official guidance on a national level is issued by the MFSA in order to clearly delineate its approach towards sustainability and safeguarding consumers against greenwashing. At this stage, the MFSA has only catered for guidance on specific topics as outlined above and no specific aspects in relation to sustainability and greenwashing have so far been tackled. \n Rule 4.4.92 of the COB Rules derives from Article 9(6) of the amended Delegated Regulation (EU) 2017/2359 , whilst Guidance 4.4.100 derives from Recital 14 of Commission Delegated Regulation (EU) 2021/1257. \n On the other hand, the relative parts of the Consumer Affairs Act quoted above implement 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 InternalMarket. "]
["Is greenwashing, which may occur in the financial sector, addressed specifically and/or any differently from greenwashing in other sectors?","Greenwashing in the financial sector is currently addressed generally through the various initiatives and guidelines issued by various European bodies. There are no specific requirements under Maltese law which currently address greenwashing directly. The only general prohibition that applies today, across all sectors, including the financial services sector, is the prohibition on misleading commercial practices laid down by consumer law.\n"]
["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 under Maltese law. This notwithstanding, reference may be made to \nRecital 13 of Commission Delegated Regulation (EU) 2021/1257 of 21 April 2021 amending \nDelegated Regulations (EU) 2017/2358 and (EU) 2017/2359 as regards the integration of sustainability factors, risks and preferences into the product oversight and governance requirements for insurance undertakings and insurance distributors and into the rules on the conduct of business and investment advice for insurance-based investment products – such a Recital states that “‘greenwashing’, that is, in particular, the practice of gaining an unfair competitive advantage by recommending an insurance-based investment product as environmentally friendly or sustainable, when in fact that insurance-based investment product does not meet basic environmental or other sustainability-related standards.”\n \n"]
["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 sector?","There is no clear legal definition of greenwashing. This will result in supervisors not being able to clearly determine those instances where there are cases of greenwashing, which in turn will result in a lack of enforcement of the same due to supervisors not being able to establish direct customer detriment.\nThe current sustainability framework (\nSFDR Level 1 and Level 2 as well as \nTaxonomy) is somewhat quite technical and still subject to some interpretation in some instances. The \nLevel 2text expects financial market participants to easily be able to abide by the regulations and produce the required data and information as outlined in the \nLevel 2 text, which is clearly something that financial market participants are struggling with.\nThe data which financial market participants are to disclose is not regulated and/or benchmarked as well as fragmented in some aspects, which leads to disclosures being somewhat distorted and not consistent. Furthermore, given that this is still in its infancy, particular data which is being required to be disclosed may not yet be available. Finally, different data service providers may potentially use different methodologies for producing certain data, which will also lead to inconsistencies.\nMore training is required in the area both from retail as well as from a financial market participant point of view. In view of the vast topics being covered through the current regulations, financial market participants need to be able to understand exactly the type of financial product that they are offering, including the data sources underlying such financial products.\nThere is a lack of harmonized rules and guidelines in relation to the manner in which greenwashing is determined. This will lead to different approaches being taken by different regulators in relation to the assessment of greenwashing in financial products. As a result, a tailor-made framework will definitely help in ensuring a level playing field across the board.\nFurthermore, the lack of standardized ESG labels and fragmented data sources also leads to a fragmented way of how environmental costs-benefit analysis is determined, which will potentially lead to different interpretations in terms of greenwashing benchmarks.\n"]
["Are there any relevant links to national legislation and/or guidance?","MFSA Conduct of Business Rulebook: \nhttps://www.mfsa.mt/wp-content/uploads/2019/08/20190819-Conduct-of-Business-Rulebook-Revisions.pdf \nMFSA Rules for MiFID Firms: \nhttps://www.mfsa.mt/wp-content/uploads/2022/07/20220719_IFF_ISR_PartBI_InvestmentServicesProviders.pdf \nMFSA Rules for AIFMs: \nhttps://www.mfsa.mt/wp-content/uploads/2019/01/REVISED_ISR-ISP-PartBIII_201701311.pdf \nMFSA Rules for UCITS ManCos: \nhttps://www.mfsa.mt/wp-content/uploads/2019/09/20190422_UCITSMC_BII.pdf \nMFSA Consumer Awareness section on the website: \nhttps://www.mfsa.mt/consumers/consumer-awareness/sustainable-finance/ \nConsumer Affairs Act: \nhttps://legislation.mt/eli/cap/378/eng/pdf \nCommission Delegated Regulation (EU) 2021/1257 of 21 April 2021: \nhttps://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32021R1257&from=EN \n"]