More than two thirds of Irish financial services firms are not fully compliant with European Union rules introduced more than a year ago to prevent greenwashing.
A recent survey of 125 Irish financial services organisations found that just 29 per cent are fully complaint with the EU’s Sustainable Finance Disclosure Regulation (SFDR), which was first introduced in April 2022.
The regulation requires organisations to provide detailed information about how they tackle and reduce any possible negative impacts their investments may have on the environment and society in general.
It aims to improve transparency in the market for sustainable investment products and to prevent “greenwashing” – when companies attempt to present themselves and their activities as more environmentally friendly than they actually are – by providers of certain financial products and services, such as investment funds.
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The survey by the Compliance Institute, Ireland’s professional body for compliance professionals, found that 78 per cent of firms have taken some action since the SFDR was introduced last April to incorporate new technical standards into their reporting practices but only 29 per cent are fully compliant.
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Almost one in five are either awaiting further guidance on how exactly to proceed with the new rules or are planning to adapt to the requirements this year.
More than half, 56 per cent, of financial firms said they support the new rules, while 40 per cent said they are “not sure” about them and that they are “tough on those companies operating within the financial services sector”.
Michael Kavanagh, chief executive of the Compliance Institute, encouraged companies to get up to speed on SFDR rules, not only for the sake of the environment but to avoid any penalties for failing to meet the requirements of the law.
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“While it is encouraging that almost a third of financial services organisations are fully compliant with the new EU rules introduced around the disclosure of sustainability-related information, the fact that two-thirds of companies are not following them cannot be ignored,” he said.
Mr Kavanagh said that the SFDR is a “key tool” for the prevention of greenwashing which has “become more of an issue in recent years”.
A survey by the Compliance Institute last year found that more than four in ten businesses have seen evidence of greenwashing by companies operating in Ireland.
