New Rules for Green Funds: What Investors Need to Know
The European Securities and Markets Authority (ESMA) released a final report with guidelines on how fund names can use ESG or sustainability terms.
ESMA created these guidelines to protect investors from misleading claims about a fund's sustainability focus. They also provide clear rules for asset managers to follow when using these terms in fund names.
The guidelines state that at least 80% of a fund's investments must align with its environmental, social, or sustainable goals in order to use these terms.
READ MORE: Research: European ESG Funds Invested Over €123B in Fossil Fuels
Also, there are specific restrictions on how certain terms can be used. For example, terms like "environmental," "impact," and "sustainability" can't be used in ways that contradict the rules for Paris-Aligned Benchmarks (PAB). Similar restrictions apply to terms like "transition," "social," and "governance" based on Climate Transition Benchmarks (CTB) rules.
The report also clarifies how these guidelines apply to funds that use a combination of terms or reference a specific index as a benchmark.
Finally, the report summarises the feedback ESMA received on their initial proposal and explains how they incorporated that feedback into the final guidelines.
Discover an extensive network of ESG providers here
Source: ESMA
Get the ESG Brief in your inbox
One concise email a week — the ratings moves, regulation deadlines, and vetted solutions that matter. Trusted by sustainability and finance teams.
No spam · unsubscribe anytime.
