Clarifying greenwashing: a new ABBL/Deloitte discussion paper

Sustainable finance has become a central pillar of the European financial system. As the regulatory framework continues to expand and the environmental transition accelerates, new concepts and expectations are emerging. Among them, greenwashing has rapidly become one of the most widely used, and often misunderstood, terms in sustainability discussions.

To help clarify this complex topic, the ABBL, in collaboration with Deloitte, has published a new discussion paper entitled “How to introduce best practices to prevent greenwashing – Practices and challenges for the Luxembourg banking industry.”

Why address greenwashing?

The term greenwashing is increasingly used across the financial sector, yet its meaning remains unsettled and its regulatory treatment continues to evolve. In many cases, it has become a catch-all expression to describe broader challenges linked to the implementation of sustainable finance rules.

Since 2019, the European sustainable finance framework has expanded significantly, with major initiatives such as the EU Taxonomy, the Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD). While these initiatives play an essential role in supporting the transition to a more sustainable economy, their complexity can also create uncertainty for investors, financial institutions and the wider public.

This challenge is compounded by the absence of a consistent definition of greenwashing across regulatory frameworks. This lack of alignment can weaken both the supply of sustainable finance products and investor confidence, even though financing the environmental transition remains a key priority.

Against this backdrop, the discussion paper aims to clarify what greenwashing means in practice and how related risks may arise within banking activities.

Why now?

Greenwashing has moved to the forefront of supervisory attention. Regulators and policymakers across Europe are increasingly focused on ensuring that sustainability claims made by financial institutions are accurate, transparent and properly substantiated.

At the same time, sustainable finance has evolved from a niche topic into a core component of banking strategy. Sustainability considerations now affect product development, investment decisions, disclosures and risk management across the sector.

As a result, banks must ensure that ESG-related statements and commitments are supported by robust governance, compliance and risk management frameworks.