ESMA issues sustainability claims guidance for funds and bonds in Europe

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ESMA sustainability claims guidance

Highlights

ESMA published thematic notes on June 19, 2024 providing guidance for sustainability-related impact and climate transition claims across funds, bonds, and benchmarks.
Guidance emphasizes clear explanations of impact ambition, methodology, measurement, and transparent disclosure of assumptions and limitations to improve claim credibility.
The notes aim to reduce greenwashing risk and improve consistency in non-regulatory sustainability communications, but do not impose new regulatory obligations on market participants.

New guidance on impact and transition claims

As reported by European Securities and Markets Authority, the regulator has published two additional thematic notes on sustainability-related claims to help market participants communicate more clearly with investors. The guidance focuses on impact claims linked to funds and bonds, and on climate transition claims used across funds, bonds and benchmarks.

On impact claims, ESMA says market participants often use the concept of positive environmental or social impact in different ways and with varying degrees of ambition. The note encourages firms to explain what difference they expect to make, how they plan to generate that impact and how results will be measured, so investors receive clear and balanced information.

For climate transition claims, ESMA says these statements are often forward-looking and subject to uncertainty because outcomes may depend on future actions, assumptions and external factors. The note stresses the need to communicate the transition ambition clearly, how it is expected to be implemented and how progress will be assessed and disclosed, including assumptions, data limitations and dependencies.

Broader push to limit greenwashing risk

The thematic notes set out practical do's and don'ts for sustainability claims in non-regulatory communications, using examples of stronger and weaker market practice observed by ESMA. The aim is to support communications that are clear, fair and not misleading, reducing the risk that investors are given an inaccurate impression of sustainability outcomes.

These publications form part of ESMA's broader effort to improve transparency and consistency in sustainability-related disclosures across the EU market. The authority says the notes do not create new regulatory requirements or prescribe a single approach, but instead provide observations and examples to help firms understand existing expectations under the principle of clear, fair and not misleading communication.

In our earlier article on climate and sustainability tipping points for businesses, we explained how abrupt environmental thresholds can create both material economic risks and self-reinforcing transition opportunities. We highlighted examples such as coral reefs, tropical forests and AMOC-related disruption risks, alongside “positive tipping points” in clean electricity, clean cooking and deforestation-free supply chains that can accelerate decarbonisation once adoption becomes self-sustaining.

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