Background: The trend in environmental reporting has been continuously increasing. However, there is a lack of accepted uniform standards for accreditation, standardization, and evaluation of green investments, which slows down the process of mobilizing capital to meet sustainability objectives. In response to this, the European Union has created, in summer 2019, a new Taxonomy Regulation in an effort to increase green investing. Purpose: Skepticism towards green organizations is on the rise and the phenomenon, namely greenwashing, can be argued to be one of the biggest threats to sustainable development. Previous research on greenwashing has so far only looked at the effects it has on consumers. This study identifies this research gap and alternatively investigates the perspective of the investors on greenwashing. Prior to the EU Taxonomy, there were limited regulations in place to ensure a universal measurement of sustainable actions that were mandatory. This raises the question of whether the EU Taxonomy truly has the potential to reduce greenwashing or not. A descriptive investigation of the current literature on problems of greenwashing within the financial sector can seek to identify the critical themes concerning the EU Taxonomy. Construct a framework on which the EU Taxonomy may be most effective in reducing the types of greenwashing. Research Question: What is the potential of the new EU Taxonomy to increase transparency within the sustainable financial sector that is threatened by greenwashing? Method: Qualitative study; exploratory case study approach; the paradigm of interpretivism as our research philosophy; interviews based on the inductive approach, semi-structured interviews with a mix of open- and close-ended questions; purposive sampling method; triangulation data analysis with findings visualized in a tree diagram. Conclusion: A framework is presented that identifies the high/moderate/low potentials of the EU Taxonomy decreasing greenwashing in the financial sector. Our findings conclude that the EU Taxonomy showed great potential in giving a more comprehensive understanding of the company’s sustainable actions. The development of our findings contributes to a better current understanding of the threats of greenwashing for investors and can help to increase their confidence in sustainable investing.