ESMA – Criteria for the use of ESG terms in fund names

On 14 May, ESMA (European Securities and Markets Authority) published guidelines for funds that use ESG terms or other sustainability-related terms in their names.

ESMA emphasized that a fund’s name is a marketing tool that conveys information about the fund. Therefore, to better protect consumers and prevent them from being misled by greenwashing practices, the Guidelines set a minimum investment threshold of 80% to be allocated to meeting ESG characteristics for a fund to use sustainability-related terms in its name.

The Guidelines will apply three months after their publication on the Authority’s website in all official EU languages, and within two months of publication, the competent Authorities to which they apply will be required to notify ESMA whether (i) they are compliant, (ii) they aren’t compliant but intend to comply, or (iii) they aren’t compliant and don’t intend to comply with the Guidelines.