ESBG responded to the ESMA consultation about the use of ESG terms in funds’ names

• ESBG underlines the need to establish, first and foremost, a clear and uniform methodology for “sustainable investments”.
• ESBG does not believe that introducing ESMA’s suggested quantitative thresholds to assess funds’ names would be the best solution.
• Instead of introducing the suggested thresholds, ESBG would like to call for a better implementation of the already existing requirements.

ESBG welcomes ESMA’s objective to tackle greenwashing when it comes to funds’ names. As a prerequisite to any action, there must be a clear and scientifically comprehensible uniform legal definition of “sustainability” to be able to present sustainability features in investment products. EU sustainability-related initiatives, such as the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation, are already aiming at creating a harmonised cross-border framework for offering sustainable products in the EU. Hence, it is too early to set thresholds until a harmonized methodology for “sustainable investments” is provided.

More specifically, ESBG believes that the proposed threshold of 80% for investments with sustainable and social objectives is too high. There is notably a surprising gap between this threshold and the ones already existing in other EU countries such as Germany or Luxembourg. ESBG is also not in favour of the inclusion of an additional threshold of at least 50% of minimum proportion of sustainable investments for the use of the word “sustainable” in funds’ names for now. This last threshold should be firstly reviewed and tested for its market suitability before being implemented.

Finally, ESBG believes that sustainable finance regulations should rather incentivise asset manager and product manufacturers to increase the taxonomy level of ESG financial instruments since this has not been sufficiently the case so far.