ESMA to Introduce Green Fund-Labelling Rules

The European Securities and Markets Authority (ESMA) has published draft guidelines for ESG and sustainability-labelled funds in an effort to stamp out greenwashing under the Sustainable Finance Disclosure Regulation (SFDR). ESMA has proposed that funds labelled as ‘ESG’ should have a sustainable investment threshold of 80%. Funds labelled as ‘sustainable’ should invest at least 50% sustainably, ESMA added, noting that these thresholds will be based on the definition of sustainable investment under SFDR. Minimum safeguards will be applied to funds using exclusion criteria, and ESMA will make “additional considerations” for index and impact funds. Verena Ross, ESMA Chair, said: “With this consultation, ESMA continues to prioritise promoting transparency and tackling the risk of greenwashing as identified in the ESMA Strategy and Sustainable Finance Roadmap. The objective is to ensure that investors are protected against unsubstantiated or exaggerated sustainability claims while providing both NCAs and asset managers with clear and measurable criteria to assess names of funds including ESG or sustainability-related terms.” The draft guidelines are open to feedback until 20 February, 2023. It follows a call to evidence to stakeholders on greenwashing by the three European Supervisory Authorities (ESAs).

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