ESMA sustainability and investment regulation

The European Securities and Markets Authority (ESMA) has introduced new guidance to combat greenwashing and misleading communications within European financial markets. The measures focus on sustainability claims made by investment funds, bonds, and benchmarks, specifically regarding environmental and social impacts and transitions toward low-carbon economies.

To ensure transparency, ESMA requires financial institutions to provide evidence-based explanations of their impact objectives, implementation strategies, and measurement methods. The regulator emphasizes that positive impacts must be demonstrable through key performance indicators (KPIs) and highlights the importance of concepts such as ‘intentionality’ and ‘additionality’. While these notes do not introduce new regulatory obligations, they clarify existing expectations as policymakers review the Sustainable Finance Disclosure Regulation (SFDR).

In a related report, ESMA noted a significant increase in EU cross-border investment services, with retail client services rising 47% in 2025 compared to 2024. Luxembourg and Cyprus were identified as primary hubs for these cross-border providers.