EBA Targets Greenwashing in Retail Banking With Overhaul of Product Governance Guidelines

Key Takeaways

• Tackling Greenwashing Head-On: The EBA is revising its POG Guidelines to explicitly address greenwashing risks in retail banking products with ESG features, following a sharp rise in misleading sustainability claims.
• ESG Integration into Product Governance: Proposed updates would require firms to factor ESG considerations into product design, internal controls, and distribution practices, without imposing new regulatory burdens.
• Data-Driven Reform: Alleged greenwashing cases in the EU financial sector rose from 40 in 2018 to 234 in 2023, prompting regulatory action to prevent consumer harm.
• Alignment with Broader EU Policy: The revisions align with changes to the Capital Requirements Directive, the Unfair Commercial Practices Directive, and other EU sustainability-focused legislation.

Deep Dive

The European Banking Authority (EBA) has recently announced that it is launching a public consultation to revise its long-standing Guidelines on Product Oversight and Governance (POG). The revisions would, for the first time, formally incorporate ESG-related risks into how financial products are designed, marketed, and reviewed without, the EBA insists, adding unnecessary red tape.

The proposed updates, published July 9, are a direct response to the EBA’s 2024 report on greenwashing, which flagged a sharp uptick in potentially misleading sustainability claims across Europe’s banking sector. The consultation is open until October 9, 2025, and the final revised guidelines are expected in early 2026.

“Financial products with ESG labels should be more than just green in name,” the EBA implied through its careful but pointed revisions. “They need to live up to the standards they promise—and we need to make sure they do.”

Rather than tear up the existing framework though, the EBA is proposing a focused refresh and simply tweaking a handful of POG provisions to make ESG and greenwashing considerations explicit in the design, oversight, and distribution of retail banking products.

That includes updating:

• The definition of subject matter, to clearly include products with ESG features;
• Internal control expectations, requiring firms to proactively manage greenwashing risks;
• Target market definitions, ensuring ESG claims align with actual product characteristics and client needs;
• Distribution practices, to prevent mis-selling or misleading marketing.

The EBA is threading a fine needle, aiming to protect consumers from ESG-related misrepresentation without bogging down firms in bureaucracy. The draft Guidelines deliberately steer clear of imposing sweeping new obligations, instead encouraging firms to use their existing oversight mechanisms more responsibly when it comes to sustainability claims.

From 40 to 234 Cases: Greenwashing Isn’t Hypothetical

The urgency behind the revisions isn’t theoretical. According to RepRisk data cited in the EBA’s 2024 greenwashing report, alleged greenwashing cases in the EU financial sector jumped nearly sixfold, from 40 in 2018 to 234 in 2023.

What’s more, these aren’t just isolated environmental slip-ups. The EBA report found that over 20% of greenwashing cases involved more than one ESG dimension, often blending environmental, social, and governance claims in ways that were misleading, incomplete, or downright deceptive.

The update also brings the POG Guidelines in line with recent EU legislative changes. These include:

• Amendments to the Capital Requirements Directive (CRD) and Regulation (CRR), which now require banks to factor ESG risks into strategy and supervision;
• Revisions to the Unfair Commercial Practices Directive, which directly tackle deceptive sustainability claims;
• And an expanded EBA mandate to cover consumer credit products, which are now officially within scope of the POG framework.

Taken together, these reforms are part of a broader regulatory push to ensure Europe’s sustainability agenda doesn’t become a marketing gimmick.

The public consultation will run through October 9, 2025. A virtual hearing is scheduled for September 11, giving stakeholders an opportunity to weigh in before final Guidelines are released in early 2026. Once adopted, the updated Guidelines would take effect on December 1, 2026. Until then, the EBA is walking a line between encouragement and enforcement.

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