Update: ESMA Guidelines on ESG Fund Names – Key Information and Upcoming Deadlines

European Securities and Markets Authority (the “ESMA”), on 21 August 2024 officially published the translations of its Guidelines on the use of ESG or sustainability-related terms in fund names (the “Guidelines”) in all official EU languages. This marks the commencement of these Guidelines, which are set to come into effect on 21 November 2024 for new funds, with existing funds being granted a six-month transition period to comply.

What You Need to Know

The primary intention of these Guidelines is to protect investors from unsubstantiated or exaggerated sustainability claims in fund names and to provide asset managers with criteria for the use of ESG or sustainability-related terms in fund names. You can access our summary table on the Guidelines here.

Updates Across the EU

The Luxembourg regulator (the “CSSF”) has already emphasised that the Guidelines apply to Investment Fund Managers (“IFMs”) managing UCITS or AIFs, regardless of whether they disclose under Articles 6, 8, or 9 of the Sustainable Finance Disclosure Regulations. The CSSF expects IFMs to conduct a self-assessment of the applicability of the Guidelines to the products they manage and to ensure that fund names comply with these Guidelines.

The German regulator, BaFin, also recently announced that it will now take the ESMA Guidelines into account for processing all newly received applications. This means that the mere presence of sustainability terms in a fund’s name will now trigger an examination of the investment conditions to ensure compliance with BaFin’s administrative practices.

Important Dates

• 21 November 2024: Application date for the Guidelines.
• 21 October 2024: Deadline for NCAs notifying ESMA about compliance intentions.
• 21 May 2025: End of the transitional period for existing funds. All existing funds must be in full compliance by this date.
• New funds created on or after the application date (21 November 2024) must comply with these Guidelines immediately.

Suggested next steps

• Review all existing and upcoming fund names that include ESG or sustainability-related terms.
• Assess whether your current and planned fund names align with the ESMA Guidelines.
• Identify any discrepancies or areas where the fund names may not meet the criteria set out in the Guidelines.
• Ensure that all new funds launched from 21 November 2024 onward comply with the Guidelines.
• Develop a timeline and strategy to bring existing funds into compliance within the six-month transition period.
• Be prepared to inform investors of any changes.
• Establish ongoing monitoring mechanisms.
• Prepare for regulatory scrutiny and keep records of your compliance efforts.

Need Help with ESMA Guidelines Compliance? 

The Zeidler ESG Legal Advisory Team  of global sustainable finance and ESG experts are here to assist with any questions or support you may need.  

Contact us for more information or a bespoke consultation.