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| 4 minutes read

EU: ESMA identifies areas for improvement in firms’ sustainability claims in marketing communications

In 2023, ESMA launched a Common Supervisory Action (CSA) and mystery shopping exercise (MSE) on the application of disclosure requirements with regard to marketing communications, which also focuses on sustainability aspects.   ESMA has now published its final report setting out its analysis and conclusions on the MSE and CSA. Overall, ESMA found that investment firms generally have procedures in place that ensure compliance with MiFID II marketing requirements, including during development. However, ESMA also expressed several concerns about marketing material, including sustainability claims where several areas have been identified for improvement.

A total of 208 firms were included in the CSA sample, 57% of which were credit institutions and 43% investment firms. A total of 62 firms were included in the MSE sample, 58% of which were credit institutions and 42% of which were investment firms.

Key sustainability observations

A - Processes and Procedures relating to sustainability

ESMA stressed the importance of involving control functions and senior management in internal processes and procedures of the reviewed firms with regard to the development of marketing communications (including advertisements) which include sustainability related claims, in order to safeguard that the sustainability claims are fair, clear and non-misleading. In addition, ESMA states that this also may reduce greenwashing risks.

In this context ESMA refers to the findings reported by certain NCAs from their evaluation of marketing material with regard to the sustainability of the instrument or the entity and whether this specific information is presented in a fair, clear and non-misleading way.  Among other things, NCAs have identified that:

  1. typically, firms do not have specific processes and procedures for sustainability related claims in marketing material (instead applying the same processes for all products); and 
  2. in some cases, firms have implemented additional controls which included e.g.:
  • the involvement of a sustainability officer or unit (when marketing materials included ESG characteristics),
  • consistency checks when including sustainability claims in marketing material and relevant documentation
  • the development of internal guidance regarding products with sustainability features – with particular attention given to greenwashing risk,
  • ex-post reviews to minimise the risk of greenwashing, and
  • additional staff training related to sustainability
  • additional controls in place for the distribution of 3rd party funds (including consistency checks between marketing and other relevant documentation)
  • engagement with sustainability experts for the review and correction of deficiencies of market communication.

3.  some firms are not publishing sustainability claims related to 3rd party products (typically due to a lack of data or lack of the ability to verify available data), but instead only publishing claims related to internal products stemming from the same group as the firm.

B – Presentation of sustainability claims - clear, fair and not misleading? 

ESMA stresses the importance of the requirement that sustainability claims regarding MiFID II instruments and services be clear, fair and not misleading. Moreover, ESMA is particularly “concerned by the non-compliant examples shared by NCAs regarding sustainability claims in marketing communications” – the concern being that potential investors are being given misleading impressions of whether (or the extent to which) a product, service or brand is ESG oriented.  Examples cited include:

  • materials advertising the green nature of a product or service with no evidence to support this claim; and
  • sustainability characteristics of financial instruments/services not being presented in a balanced way compared to the other characteristics.

The Final Report again highlights the observations of NCAs. Overall, NCAs observed that the level of detail regarding ESG-features differed significantly from one entity to the other. Key examples identified by NCAs of sustainability claims not being clear fair and not-misleading, include:

  1. Generic references in marketing communications – i.e. general E, S and G aspects without reference to the SFDR Art 8/9 disclosures (albeit that NCAs reported the marketing communications being substantiated by other documentation) – and in some cases generic sustainability claims not backed up by evidence.  On the other hand, some NCAs reported in some cases more specific marketing materials directly mentioning and addressing sustainability, including for example explicitly referencing SFDR disclosures, explicit reference to the sustainability section of a fund’s asset manager’s website and sustainability objectives by reference to issuer sustainability data;
  2. In many cases, ESG-related information and disclosures are not substantiated with data or sources (e.g. (i) references to ESG ratings/scores without details of the meaning of such ratings/scores; (ii) refences to sustainability statements in regulatory documents without any links to the relevant documents ), and (iii) a lack of hard data/real world impact to back up brochures and materials outlining, among other things, a firm’s responsible objectives, aspirations and organisational framework;
  3. A fund with no ESG profile using imagery including a green planet/windmills/a recycling sign on a poster; 
  4. include information not being presented in a balanced manner (e.g. excessive emphasis on “sustainable” or “responsible” features for a financial instrument also containing non-sustainable features), or claims implying that an investment choice can have a direct impact on environmental/social transition/improvement;
  5. A lack of corroboration of sustainability claims in social media posts – for example one bank claiming in an article to be “the most sustainable bank in the world”;
  6. Some firms comparing themselves to others without disclosing sources of information and key facts and assumptions used for comparison and by stating such claims as “We pay above-average attention to social and environmental issues”; “We are the first sustainable bank [in a given jurisdiction]”; “Our firm has become the reference in the market of sustainable and responsible investments”.

That being said, positive examples have also been identified: 

  • Some entities have referenced in their marketing material, that they were following net zero plans or adhering to reporting initiatives such as UNPRI, UN Global Compact or Net Zero Banking Alliance, while not directly promoting themselves as “green” or “sustainable”.
  • A number of firms indicated that they selected their investments on the basis of the compliance with international principles or standard (as well as national local initiatives or to EU’s climate commitments) by the firms in which they invest. When firms presented themselves as sustainable/responsible, they often supported such qualifications by providing information on their commitments, strategy and progress in such areas. 

Next Steps 

ESMA will continue liaising with NCAs on this topic and exchange on their (planned) follow-up actions. Furthermore, ESMA will assess whether there is a need to use supervisory convergence tools to build a stronger supervisory culture across the EU and promote effective, sound and consistent supervision with regard to marketing communications including advertisements. ESMA also encourages NCAs to consider the use of sanctions in case of breaches.

The report published on 27 May 2024 is available here, and ESMA’s press release is available here.

NCAs are encouraged to consider the use of sanctions in case of breaches. ESMA and the NCAs will continue working on the topic given the substantial role that marketing communications and advertisements can play in determining consumer behaviour and influencing investment decisions.


asset managers & funds, banks & insurers, greenwashing, sustainable finance