On 18 November, ESMA released its Consultation Paper to gather feedback on the use of ESG or sustainability-related terms in fund names.

The Proposed Guidelines will apply to requirements under the UCITS Directive, AIFMD and Regulation 2019//1156 (cross-border distribution of investment funds).

Key provisions include:

• General requirements pertaining to fund’s names in fund documents or marketing communications to tackle greenwashing.

• Proportion of investments for funds’ names using ESG or sustainability-related terms, notably

• A minimum proportion of at least 80% of the fund’s investments if a fund has any ESG-related words in its name.

• Inclusion of an additional threshold of at least 50% of minimum proportion of sustainable investments for the use of the word “sustainable” or any other sustainability-related term in the name of the fund.

• Funds that designate an index as a reference benchmark

• Specific provisions for “impact” or impact-related names in these Guidelines

Comments must be submitted by February 20, 2023.