![\"EU](\"https:\/\/www.europesays.com\/europe\/wp-content\/uploads\/2026\/09\/RI_EUpuzzle.jpg\" "\\"EU")
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By the end of this week, one of the world\u2019s most ambitious anti-greenwashing regimes will be fully applicable across Europe.<\/p>\n
The Empowering Consumers for the Green Transition (ECGT) Directive, nicknamed EmpCo, will update the EU\u2019s existing Unfair Commercial Practices Directive (UCPD) with more explicit rules around sustainability claims.<\/p>\n
\u201cIt will go a lot further than almost any other regulation or legislation in the world,\u201d says Renske Mackor, director of regulatory and sustainability risk at PwC Netherlands. \u201cAny statement that a business makes in the context of a commercial activity towards consumers falls within the scope.\u201d<\/p>\n
EmpCo places major restrictions on how firms can communicate about their goods, services and brands, including by banning generic, vague or exaggerated claims. \u201cSaying your company is sustainable, for example, is prohibited unless you can prove it with a recognised external certification or label,\u201d says Mackor.<\/p>\n
More specific claims have to be substantiated with clear evidence, and forward-looking claims must be expressed as serious, timebound targets.<\/p>\n
\u201cYou won\u2019t be able to just say you\u2019ll be net zero by 2050 anymore \u2013 you\u2019ll have to have an implementation plan that\u2019s reviewed and verified by a third party on an ongoing basis,\u201d says Mackor. \u201cAnd carbon offsetting claims will only be permitted if they relate to offsets undertaken within the value chain of that particular product. Anything else is prohibited.\u201d<\/p>\n
Investor implications<\/p>\n
While the ECGT Directive is usually talked about in the context of physical goods and services, it also covers financial ones \u2013 including all investment funds and pension products made directly available to European retail investors, even if the primary audience is professional investors.<\/p>\n
\u201cVague green claims mislead people, whether they\u2019re buying a washing machine or a fund,\u201d says Anyve Arakelijan, a senior regulatory policy adviser at the European Fund and Asset Management Association (EFAMA).<\/p>\n
However, she says, some of EmpCo\u2019s tests were designed with physical items in mind, and are not well-suited to investment products \u2013 such as the requirement for words like \u201cgreen\u201d or \u201csustainable\u201d to be used only when accompanied by proof of excellent environmental performance.<\/p>\n
\u201cFor a physical product, that makes sense \u2013 you can measure its footprint, and you can certify it,\u201d says Arakelijan. \u201cA fund is different. What makes a fund sustainable is how it invests \u2013 what it holds, what it excludes, what methodology it uses, and what it discloses to investors.\u201d<\/p>\n
As she notes, Europe\u2019s investment industry already has two sets of greenwashing rules \u2013 the Sustainable Finance Disclosure Regulation (SFDR)<\/a> and guidance from the European Securities and Markets Authority (ESMA)<\/a> on using terms like ESG or sustainable in fund names.<\/p>\n Regulation overlap<\/p>\n A key question for investors will be how EmpCo fits with the EU\u2019s other greenwashing rules. Every part of the Unfair Commercial Practices Directive can be overridden if another, more appropriate consumer protection regime already exists.<\/p>\n \u201cThe discussion now is whether SFDR fulfills that definition,\u201d says Heike Schmitz, a senior lawyer specialising in sustainable finance at Herbert Smith Freehills.<\/p>\n And, according to the European Commission, it does.<\/p>\n \u201cFor sustainability-related disclosures that it specifically regulates, [SFDR] takes precedence over more general consumer-law rules,\u201d said a spokesperson. \u201cThe UCPD does not impose parallel or conflicting requirements on elements that are specifically regulated by the SFDR.\u201d<\/p>\n The Commission has proposed a clarification in the next iteration of SFDR to make it explicit that the legislation functions as a consumer protection regime, and therefore supersedes EmpCo\u2019s rules.<\/p>\n \u201cAbsurdly, this is taken as an argument by some in the market to say that, if the Commission takes the step to clarify it, it is fair to assume the current SFDR is not explicitly seen as a specialised consumer protection law,\u201d says Schmitz. \u201cAnd that\u2019s the version that\u2019s in place for the time being.\u201d<\/p>\n That\u2019s the position taken by EFAMA, in lieu of official guidance.<\/p>\n \u201cUnder the Commission\u2019s SFDR 2.0 proposal, the idea is that if you follow SFDR properly, you also meet the consumer protection requirements. But that is still being negotiated and isn\u2019t expected to apply before 2028,\u201d says Arakelijan.<\/p>\n \u201cSo for about two years, the same fund communication may be checked twice, by financial supervisors and by consumer authorities or civil courts, using different criteria.\u201d<\/p>\n ESMA\u2019s guidelines will create another complication, she adds.<\/p>\n For instance, they permit a fund to be called \u201csustainable\u201d if at least 80 percent of its investments are used to meet its environmental or social characteristics or sustainability objectives, and it applies strict exclusions.<\/p>\n \u201cThe risk is that a court could still treat the term \u2018sustainable\u2019 as a generic environmental claim under EmpCo, and ban it unless the fund can show \u2018recognised excellent environmental performance\u2019 \u2013 a test built for physical products,\u201d says Arakelijan. \u201cSo a fund that follows its financial rules could still be challenged in court.\u201d<\/p>\n The Commission says EmpCo will \u201coperate as a horizontal and complementary safety net for aspects that are not specifically governed by sector-specific legislation, including the overall presentation of environmental claims to consumers\u201d.<\/p>\n This means entity-level descriptions like \u201cresponsible investor\u201d, or common assurances such as \u201csustainability is in our DNA\u201d, must be clearly evidenced.<\/p>\n Climate targets or net-zero pledges made available to consumers to help sell products or services will now have to be communicated as quantitative targets with deadlines, backed by a verified transition plan and updated at regular intervals.<\/p>\n \u201cYou can\u2019t claim your whole organisation is going green unless it really is the whole organisation,\u201d says Marcus Navin-Jones, senior counsel and environmental specialist at law firm Crowell & Moring.<\/p>\n But there is confusion about whether, under the Commission\u2019s definition, EmpCo still might be applied to certain product-level claims as well.<\/p>\n \u201cIt\u2019s unclear what would happen if you use information you\u2019ve disclosed in compliance with SFDR within your marketing materials, too,\u201d says Schmitz.<\/p>\n \u201cIs a statement that\u2019s acceptable in the context of SFDR now subject to a different set of rules once it becomes marketing? If you say your emissions have reduced by X percent over a period as part of your SFDR reporting, do you have to get it verified externally if you also want to say that in your brochures?\u201d<\/p>\n When it comes to ESMA\u2019s Guidelines, part of the concern is legal status, notes Arakelijan. \u201cEmpCo is legislation, while ESMA\u2019s naming rules are guidelines, so it isn\u2019t clear whether a court would give them priority,\u201d she says.<\/p>\n Enforcement questions<\/p>\n A number of regulatory experts within investor bodies have told Responsible Investor that they see little chance of these issues being tested in court. EmpCo was built for physical products, and that would likely be reflected in how it was enforced, they say.<\/p>\n Each EU member state will transpose the directive into national law differently, with some countries handing enforcement powers over to consumer protection agencies and others to competition authorities. Others may leave it to NGOs to go through the courts.<\/p>\n \u201cYou need to be located in a country where there\u2019s actually enforcement risk,\u201d says Schmitz, who is based in Germany \u2013 arguably the most likely source of EmpCo-based investor litigation because of its big retail market and consumer agencies known to target financial institutions.<\/p>\n But Navin-Jones says investors elsewhere should also be on their guard, because supervisors across the bloc have stated their intention to look into greenwashing in the sector.<\/p>\n In 2023, for example, the Dutch Authority for the Financial Markets (AFM) published its Guidelines on Sustainability Claims, which are broadly in line with EmpCo. It has since done a deep-dive into how pension funds are complying.<\/p>\n A spokesperson told RI the topic \u201cwill remain a focus of the AFM in coming years\u201d, adding that any company covered by the UCPD will also soon be covered by EmpCo.<\/p>\n \u201cWe expect financial institutions to be aware of this and comply with the rules accordingly,\u201d he said. \u201cWe expect market participants to assess their sustainability claims against the applicable legal requirements and the principles set out in our guidelines, and to make further improvements where necessary.\u201d<\/p>\n French supervisor AMF, on the other hand, told RI that EmpCo\u2019s entry into force \u201cis not expected to result in any significant changes for the financial sector\u201d because investors are already subject to the SFDR.<\/p>\n The Danish Financial Supervisory Authority, the Belgian Financial Services and Markets Authority, and Germany\u2019s BaFin have all stepped up their efforts around greenwashing in the investment industry since 2021.<\/p>\n \u201cOne of the big questions is whether the consumer protection coordination authorities will act together, with the backing of the Commission, to stop greenwashing in the financial sector through enforcement of the ECGT rules,\u201d says Navin-Jones.<\/p>\n The Commission oversees a group called the CPC Network, which seeks to encourage a harmonised approach to consumer protection by enabling national bodies to cooperate on priority areas, with fines of up to 4 percent of business turnover.<\/p>\n \u201cIf the CPC Network targets the finance sector, it will likely drive significant changes across the board,\u201d says Navin-Jones. \u201cIf you\u2019ve got all these countries talking about prioritising this issue, it\u2019s logical we might see coordinated action.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"By the end of this week, one of the world\u2019s most ambitious anti-greenwashing regimes will be fully applicable…\n","protected":false},"author":2,"featured_media":145490,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[52004,4,26028,1936],"class_list":["post-145489","post","type-post","status-publish","format-standard","has-post-thumbnail","category-europe","tag-asset-managers","tag-europe","tag-greenwashing","tag-regulation"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts\/145489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/comments?post=145489"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts\/145489\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/media\/145490"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/media?parent=145489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/categories?post=145489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/tags?post=145489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}