GLOBAL INNOVATION FINANCIAL NETWORK- ECONOMY
News: RBI to join 12 other regulators to tackle
‘greenwashing’ risks
What is in the news?
●
The Reserve Bank of India
said it will join 12 international regulators in the Global Financial Innovation Network's first-ever Greenwashing- Tech
sprint.
Key takeaways:
●
The TechSprint will bring
together 13 international regulators alongside firms and innovators to address
GFIN’s priority on environmental, social and governance (ESG) and sustainable
finance.
●
This virtual TechSprint,
hosted on the FCA’s (Financial Conduct
Authority) Digital Sandbox, to bring together international regulators,
firms, and innovators to address sustainable finance as a collective priority.
Objectives:
●
TechSprint's objective is
to develop a tool that could help
regulators, or the market more effectively tackle or mitigate the risks of greenwashing in financial services.
Why to join?
●
The central bank noted
the number of investment products marketed as ‘green’ was growing.
●
Exaggerated, misleading
or unsubstantiated claims about Environmental, Social and Governance
credentials damage confidence in the products and the RBI wants to ensure
consumers and firms can trust the products have the sustainability
characteristics they claim,” the RBI said in a statement.
Greenwashing:
●
Greenwashing refers to
the practice of making false or exaggerated claims about the environmental
benefits of a product, service, or company in order to present a misleading
image of sustainability or eco-friendliness.
●
It is a form of deceptive
marketing that aims to capitalize on the growing consumer demand for
environmentally friendly products and practices.
Forms of greenwashing:
●
Hidden
Trade-offs: This occurs when a product is marketed
as environmentally friendly in one aspect but neglects to mention other
negative environmental impacts.
●
Vague
or Misleading Labels: Companies may use terms
like "eco-friendly," "green," or "natural"
without providing specific information or clear standards for what those terms
mean.
●
Irrelevant
Claims: Companies may highlight a minor
environmental improvement while ignoring more significant environmental issues
related to their products or operations.
Global Financial Innovation Network:
●
Global Financial
Innovation Network (GFIN) was launched in January 2019.
●
The Global Financial
Innovation Network (GFIN) is a network of over
70 organizations committed to supporting financial innovation in the
interests of consumers.
●
The
three main functions of GFIN:
○ Act
as a network of regulators to collaborate and share experiences of innovation
in respective markets, including emerging technologies and business models.
○ Provide
a forum for joint policy work and discussions.
○ Give
firms an environment that allows for trials of cross-border solutions.
●
Members
from India:
○ International
Financial Services Centres Authority (IFSCA)
○ Insurance
Regulatory and Development Authority of India (IRDAI)
○ Pension
Fund Regulatory & Development Authority
○ Reserve
Bank of India.