EU markets regulator the European Securities and Markets Authority (ESMA) announced the release of a new thematic note aimed at guiding market participants on its expectations for addressing greenwashing risks in their sustainability-related claims for funds and bonds, with a particular focus on positive impact and climate transition-related claims.
The new publication forms part of a series of thematic notes launched by the regulator last year regarding sustainability-related claims by issuers and fund managers, with an initial note in July 2025 focused on references to ESG credentials such as qualifications, labels, ratings, and certificates, and a second series in early 2026 on ESG integration and ESG exclusion funds.
While not creating new regulatory obligations, the thematic notes are designed to support market participants’ understanding of expectations for clear, fair and not misleading communication.
Each of the series of ESMA’s notes focus on four key principles for market participants making sustainability claims, with the claims required to be Accurate, Accessible, Substantiated and Up to Date.
In its new note examining positive impact claims ESMA said that observed practices indicated confusion between investor and investee impact, claims being made without a clear rationale as to how the investment strategy is expected to contribute to achieving positive impact, and claims without sufficient substantiation, noting that market participants understand positive environmental or social impact differently and attach different levels of ambition to their impact claims.
ESMA encourages providers of funds and bonds to explain clearly what difference they expect to make and how they aim to generate positive impact, considering concepts such as Intentionality, or having the explicit aim to generate positive impact, and Additionality, noting in particular that failure to distinguish clearly between investee impact and investor impact may result in misleading claims. Market participants are also encouraged to explain clearly and how they will measure results, through key performance indicators (KPIs) focused on outputs, outcomes, or impact.
For climate transition claims, ESMA noted that the claims are typically forward-looking, often relating to the gradual improvement of the climate performance of companies, assets or activities – as opposed to sustainability claims based on current environmental characteristics – which creates an inherent degree of uncertainty and potential requirements for future adjustments, because they rely on assumptions and on external factors that evolve over time, such as technological progress, public policy developments. ESMA highlighted the need for clear communication on the transition ambition pursued, including objectives, targets and metrics and the extent to which the ambition contributes to headline climate objectives at the EU or global level, as well as the implementation strategy and action plan to substantiate the transition ambition, and progress achieved towards the ambition.
In its publications, ESMA listed a series of “Do’s” and “Don’ts” and examples of good and poor practices. For fund and bond impact claims, for example, ESMA guided market participants to clarify the environmental or social problems targeted and how the intended impact will be attained and measured, and to be clear about the ambition with reference to intentionality, additionality and measurability, and to avoid relying on exclusion-based screening or ESG risk-focused metrics as substitutes for impact-related criteria, and labelling products or underlying investments as “impact” solely due to asset class or sector. For climate transition claims, “Do’s” included explaining the ambition and intended transition outcome such as reducing portfolio emissions or achieving real-economy decarbonization, and describing the science-based scenarios, decarbonization pathways, or other frameworks underpinning the ambition, while “Don’ts” included relying solely on broad aspirational statements, using metrics or alignment claims without sufficiently explaining their meaning, scope and limitations, and presenting portfolio decarbonization targets in a way to suggest that portfolio decarbonization equates to real-economy emissions reductions.
Click here to access ESMA’s new thematic notes.
