The European Securities and Markets Authority (ESMA) has published a thematic note to guide market participants, including issuers and fund managers, on sustainability-related claims and to prevent greenwashing in investor communications. This note is the first in a series and addresses Environmental, Social, and Governance (ESG) credentials, particularly in retail investor-focused communications. ESMA highlights that such claims can often be misleading, for instance, by overstating the importance of a given label or ESG award.
The note identifies specific ESG credential claims, such as involvement in net-zero alliances or voluntary sustainability reporting, labels, awards, and peer comparisons. While it does not introduce new requirements, it outlines four principles for sustainability claims: they must be Accurate, Accessible, Substantiated, and Up to Date.
Under the principle of “accurate,” ESMA advises that claims should fairly represent the entity’s or financial product’s sustainability profile without exaggeration, and should avoid omissions and vague references. For “accessible,” claims should be based on easily accessible and understandable sustainability information. The “substantiated” principle requires claims to be backed by clear reasoning, facts, and fair methodologies, with clear limitations on data and metrics. Finally, claims should be “up to date,” with timely disclosure of any material changes.
ESMA also provides a list of “Do’s” and “Don’ts” and examples of good and poor practices for ESG credentials and claims about industry initiatives, labels, awards, and peer comparisons. For instance, it advises clarifying the implications of joining industry initiatives and not referencing them once a company has left.
This thematic note is part of a broader effort by ESMA and other European Supervisory Authorities, including the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA), following the European Commission’s 2022 request for input on greenwashing risks in the financial sector. The ESAs published their initial reports in 2023 and final reports in 2024, identifying greenwashing risks and calling for enhanced supervision and regulatory tools to address these issues.
For more information, access ESMA’s thematic note [here](https://www.esma.europa.eu/press-news/esma-news/esma-promotes-clarity-sustainability-related-communications).
