EFAMA questions the threshold approach in ESMA’s proposed guidelines on the use of ESG terms in fund names

The European Fund and Asset Management Association (EFAMA) has published its response to the ESMA consultation on guidelines on funds’ names using ESG or sustainability-related terms. EFAMA members have concerns around the proposed numerical threshold approach as it may not address the underlying greenwashing issues our industry is facing due to the current lack of clarity on many key sustainable finance concepts.

EFAMA is in favour of setting common rules in order to avoid misleading information and to enhance trust and clarity in the market, especially in the fast-evolving ESG landscape. However, we suggest that ESMA delays their proposed guidelines until the lack of clarity on what constitutes a “sustainable investment” is rectified and they have worked together with the European Commission to resolve interoperability issues between the guidelines and SFDR, MiFID/IDD etc.

If ESMA proceeds with the numerical threshold approach, there are a number of important elements which would still need to be addressed.