ICMA responds to ESMA’s Guidelines on funds’ names using ESG or sustainability-related terms
20 February 2023 ICMA has responded to ESMA’s Guidelines on funds’ names using ESG or sustainability-related terms.
ICMA is supportive of efforts to bring more clarity to the sustainable investment landscape, and believes that clarity in fund naming can be an important enhancement to the existing Sustainable Finance Disclosure Regulation (SFDR).
In order to tackle the issue of greenwashing and enable investors to better navigate the landscape of products offered to them, we consider it vital to differentiate between three main types of fund labels based on the sustainability objective they are seeking to achieve which should then also be reflected in the fund names:
- Funds that focus on “ESG integration”, i.e., the consideration of ESG risks, opportunities and impacts that may be material to the future financial performance of a company or funds that employ strategies such as “exclusion/negative screening” or basic “ESG tilts”
- Funds that contain companies or financial instruments that are sustainable as measured by their effect on the environment and society
- Funds that contribute to a measurable improvement such as financing the transition to net-zero.
With ESMA having added ESG disclosure to supervision in October 2022, it would be helpful to better understand how supervision will be conducted on fund naming.