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.
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.
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.
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.
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