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EFAMA has today published its response to the ESMA consultation on guidelines on funds’ names using ESG or sustainability-related terms.
EFAMA is in favour of setting common rules in order to avoid misleading information and to enhance trust and clarity in the market, especially in the fast-evolving ESG landscape. However, we suggest that ESMA delays their proposed guidelines until the lack of clarity on what constitutes a “sustainable investment” is rectified and they have worked together with the European Commission to resolve interoperability issues between the guidelines and SFDR, MiFID/IDD etc.
Anyve Arakelijan, Regulatory Policy Adviser at EFAMA, stated: “It is unlikely that a methodology built on an unclear legal definition will increase investor understanding of ESG funds and adequately address greenwashing concerns. Rather than imposing a threshold, it would be more proportionate to mirror ESMA’s supervisory guidance on sustainability risks and disclosures by ensuring that use of ESG-related terms is supported in a material way with sufficient evidence of sustainability characteristics in the fund’s investment objectives and strategy.”
If ESMA proceeds with the numerical threshold approach, there are a number of important elements which would still need to be addressed.