In the ESMA progress report of May 2023, the three European Supervisory Authorities (ESAs) set out a common understanding of greenwashing in the form of a definition. It covers cases that are intentional and cases that are unintentional, and it applies even if investors have not actually suffered a loss.
In ESG-linked derivatives, it can arise when a KPI does not require meaningful improvement from the party being assessed, or when the confirmation of results is inadequate.