The European Securities and Markets Authority (ESMA) issued a thematic note on sustainability-related claims in ESG strategies to support clear, fair, and non-misleading communication by market participants. The note responds to the growing use of ESG terminology in product marketing and disclosures, where inconsistent definitions and vague language can create greenwashing risks. ESMA stresses that firms must ensure their sustainability claims are transparent and understandable to investors.
ESMA clarifies that it is not introducing new legal requirements but reinforcing four key principles for sustainability communications: accuracy, accessibility, substantiation, and being up-to-date. These principles should guide all non-regulatory materials, including marketing content and product descriptions. Firms are expected to explain ESG approaches in a way that avoids exaggeration or ambiguity.
The note distinguishes between ESG integration and ESG exclusions. ESG integration refers to considering material environmental, social, and governance factors in investment decisions to enhance risk-adjusted returns. ESG exclusions involve screening out specific sectors, activities, or issuers based on values or risk criteria. ESMA also provides practical dos and donts, with examples of good and poor communication practices to help firms improve credibility and investor trust.