ESMA, the European Securities and Markets Authority, has published its final report for guidelines on funds’ names using ESG or sustainability-related terms.

Following a public statement of 14 December 2023, ESMA proposed guidelines to protect investors against spurious sustainability claims in fund names. They also look to provide fund managers with clear and measurable criteria in naming their ESG funds.

The final report on guidelines says that a minimum threshold of 80% of investments should be used to meet their sustainability fund criteria. The guidelines also apply exclusion criteria for terms used in fund names:

The terms “Environmental”, “Impact” and “sustainability”-related terms are subject to exclusions according to the rules applicable to Paris-aligned Benchmarks (PAB); and

The term “Transition, “Social” and “Governance”-related terms are subject to exclusions according to the rules applicable to Climate Transition Benchmarks (CTB).

The guidelines will come into force in around 3 months time. There will be a six month transitional period for pre-existing funds.

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