ESMA issues guidance to combat greenwashing in sustainability claims

The European Securities and Markets Authority (ESMA) has released new thematic guidance aimed at preventing greenwashing within European financial markets. The measures specifically target sustainability claims made by investment funds, bonds, and benchmarks regarding their environmental and social impacts, as well as their transition toward low-carbon economies.

To improve transparency, ESMA requires financial institutions to provide clear, evidence-based explanations of their impact objectives, implementation strategies, and measurement methods. The regulator emphasized that positive impacts must be demonstrable and supported by key performance indicators (KPIs). Key concepts such as intentionality—the explicit aim to create a positive effect—and additionality—the specific contribution an investment makes that would not have occurred otherwise—are central to these expectations.

This guidance does not introduce new regulatory obligations but rather clarifies existing expectations as European policymakers review the Sustainable Finance Disclosure Regulation (SFDR). The notes address inconsistencies in how market participants communicate ambitions, urging providers to clearly define the specific environmental or social problems they aim to solve and how they intend to measure success.