ESMA’s final report on guidelines on funds’ names using ESG or sustainability-related terms

On 14 May 2024, ESMA published its final report on the guidelines for investment funds using ESG or sustainability-related terms in their names (the?Guidelines).

The purpose of the Guidelines is to ensure that investors are protected from misleading and unfounded terms in fund names, and to provide asset managers with the tools to assess how the terminology used in their funds’ names does not lead to misinformation, and possibly “greenwashing”.

The Guidelines establish that to be able to use these terms, a minimum threshold of 80% of investments should be used to meet environmental, social characteristics or sustainable investment objectives. The Guidelines also apply exclusion criteria for different terms used in fund names:?

• “Environmental”, “Impact” and “sustainability”-related terms: exclusions according to the rules applicable to Paris-aligned Benchmarks (PAB); and
• “Transition, “Social” and “Governance”-related terms: exclusions according to the rules applicable to Climate Transition Benchmarks (CTB).

In cases of a combination of terms, use of transition, sustainability- and impact-related terms, and for funds designating an index as a reference benchmark, further criteria are specified in the Guidelines. The Guidelines apply to UCITS ManCos, AIFMs (including internally managed AIFs), EuVECA, EuSEF and ELTIF and MMFs managers, as well as competent authorities.

The Guidelines apply three months after the date of their publication on ESMA’s website in all EU official languages. Having a retrospective effect, already existing (in scope) funds should also apply the Guidelines after six months from the date of their application.

For more information, please follow the link to the Guidelines: https://www.esma.europa.eu/sites/default/files/2024-05/ESMA34-472-440_Final_Report_Guidelines_on_funds_names.pdf”