MFSA flags ‘misalignment’ between objectives and public expectations of green loans

A recent study by the Malta Financial Services Authority (MFSA), exploring public awareness and attitudes toward sustainable finance and related products in Malta, revealed that just 0.2 per cents of respondents believe green loans will be actually beneficial to the environment.

Sustainable finance refers to the integration of environmental, social, and governance (ESG) factors into financial decision-making, promoting long-term investments in sustainable economic activities and projects. A common example is green loans, which some banks offer to fund environmentally friendly initiatives such as electric vehicles, solar panels, and energy-efficient lighting systems.

The study found that only 0.2 per cent of respondents believe green loans – compared to normal loans – will facilitate sustainable goals and contribute towards positive sustainable outcomes.

Meanwhile, the majority of respondents (61.4 per cent) associate green loans primarily with lower interest rates, and 54.2 per cent with reduced fees and charges. The Authority highlighted that these perceptions do not fully capture the true purpose and scope of green loans.

The Authority anticipates a strong increase in demand for sustainable finance products and services over the next five years, with only 10 per cent of respondents stating they would never consider such products during this period.

Regarding awareness of sustainable finance, 73.2 per cent of respondents claimed familiarity with the concept, yet only 58 per cent were able to define it accurately. Furthermore, just 23.6 per cent reported actively using sustainable financial products.

Among those who have used sustainable finance products, 36.4 per cent invested in green bonds and 33.9 per cent in Insurance-Based Investment Products with a sustainability focus, mainly motivated by the prospect of better financial returns.

A significant barrier to adopting sustainable financial products, cited by 40.6 per cent of respondents, is a lack of knowledge about the subject.

When questioned about the term ‘greenwashing’, a term used by companies trying to falsely portray their products, services or operations as environmentally friendly, about one-third of respondents said they have never heard of the term.

Commenting on the findings, MFSA’s Head of Conduct Supervision, Sarah Pulis, expressed concern over the limited public understanding of sustainable finance.

She warned that this knowledge gap could leave investors vulnerable to misleading claims, commonly referred to as ‘greenwashing’. Ms Pulis also noted that sustainable finance can often appear ambiguous, particularly when investors are faced with complex product features tied to sustainability claims.

She emphasised the Authority’s ongoing commitment to protecting the public, especially vulnerable investors, through greater support and education.