The European Securities and Markets Authority (ESMA) has published new research assessing the impact of its guidelines on the use of ESG and sustainability-related terms in investment fund names, finding improvements in consistency, investor protection and reduced greenwashing risks.
The study shows that the guidelines have led to closer alignment between fund names and underlying investment strategies, while prompting asset managers to reassess both branding and portfolio composition.
The analysis draws on nearly 1,000 shareholder notifications submitted in response to the guidelines by the 25 largest EU asset managers, representing around €7.5 trillion in assets under management. According to ESMA, 64% of the funds referenced in these notifications changed their names, most commonly to remove ESG-related terminology. In addition, 56% of funds updated their investment policies to strengthen their sustainability focus.
ESMA also examined the effect of fossil fuel-related exclusion requirements on around 4,000 EU funds using ESG terms in their names, together accounting for approximately €2 trillion in assets under management.
The findings indicate that funds with higher exposure to fossil fuels were more likely to drop ESG-related terms from their names, highlighting how portfolio composition has influenced compliance decisions. At the same time, funds that retained ESG terminology have reduced their fossil fuel holdings by a greater margin than other funds since the guidelines were introduced, suggesting increased efforts to align portfolios with sustainability claims.
