Greenwashing in Global Finance: An Analysis of the Role of International Treaties in Preventing False Sustainability Claims
Harithra T SezhiOct 21, 202610.5281/zenodo.23536841pp. 675–6839 pages
Greenwashing occurs when financial products, companies, or institutions make misleading claims about their environmental sustainability. As more capital flows into assets labelled "sustainable," misleading claims have been sending that money to the wrong places, which reduces investor trust and weakens the climate goals that sustainable finance is meant to support. This article examines whether international treaties can effectively prevent false sustainability claims. It argues that the existing treaties, led by the United Nations Framework Convention on Climate Change and the Paris Agreement, set general duties for the states on the matter relating to climate action and transparency. However, these treaties do not establish direct rules for private financial entities. Therefore, the treaties work indirectly through national laws, regional regulations, and soft-law standards such as the IFRS sustainability disclosure standards and the guidance of the International Organization of Securities Commissions. By analysing legal aspects and comparing enforcement in the European Union, the United States, the United Kingdom, and Australia, the article highlights three key issues: There is no universally accepted definition of sustainable finance, enforcement varies across countries and remains inconsistent, and cooperation between regulators across borders is limited. It concludes that a new global treaty on this issue is unlikely in the near term. A more realistic approach is to build on existing treaty principles by recognizing each other's disclosure standards, strengthening regulator cooperation, and applying the international legal duties of due diligence and good faith.