EU: ESMA sets out further guidance to combat greenwashing

Type of claim

Do’s

Don’ts

Impact claims for both funds and bonds

• Clarify the environmental or social problem(s) targeted and how the intended impact will be attained and measured.
   

• Be clear about the ambition with reference to intentionality, additionality and measurability, which should be communicated consistently on the ambition.
   

• Be clear about the impact-related criteria used for asset selection if the product targets investee impact.
   

• Select relevant impact KPIs for which consider defining ex-ante targets.

• Don’t make claims about generating positive impact without the theory of change clearly explaining how impact will be achieved. 
   

• Don’t rely on exclusion-based screening or ESG risk focused metrics as substitutes for impact-related criteria. 
   

• Don’t label products or underlying investments as “impact” solely due to asset class or sector. 
   

• Don’t report selectively, don’t omit binding impact objectives and KPIs selected ex-ante. 
   

• Don’t present impact‑related concepts without making clear whether these concepts are actually embedded in the product’s strategy.
   

• Don’t include disclaimers that distance the fund manager or issuer from responsibility for impact data or assumptions without explaining how their reliability is assessed.

Funds’ Impact claims

• Define a clear impact objective, linked to specific environmental and/or social challenges.
   

• Ensure consistency between ambition, impact objective and investment strategy incl. impact criteria and resources used for impact analysis or engagement.
   

• Clarify whether the fund aims to generate investee impact, investor impact, or both.
   

• If the fund targets investee impact, clarify how impact considerations influence investment decisions. 
   

• If the claim is limited to investee impact, be clear to investors that their investment does not bring additional environmental or social impact than the impact created by the investee companies.
   

•  If investor-level impact is targeted, explain which impact actions are used; how the investor impact will be monitored and/or quantified; avoid taking credit for impacts not attributable to the fund’s actions.

• Don’t use ambiguous or non-binding terms in describing impact objectives (e.g. investing in companies aligned with the UN SDGs). 
   

• Don’t make references to investor-level impact without substantiation in connection to the impact actions. 
   

• Don’t imply that investor ownership of listed securities is, on its own, expected to generate impact.
   

•  Don’t claim simply that new investments in the fund will deliver extra positive impact.
   

• Don’t reference impact-motivated engagement unless you clarify how this is different from standard ESG engagement.

Bonds’ impact claims

• Ensure consistency between the bond’s impact claims and the issuer’s sustainability strategy.
   

• Be transparent about the level of materiality of the projects financed (UoP) or targets selected (SLBs) to the issuer’s core business operations. 
   

• Explain how the bond issuance contributes to positive impact (link between proceeds/targets and claimed impact, how the issuance contributes to impact beyond business‑as‑usual financing). 
   

• For UoP, ensure that proceeds are allocated to clearly identifiable projects and that a verifiable funding link between the issuance and financed projects is available.
   

• For SLBs, explain the ambition of the Sustainability Performance Targets (SPTs) and their relevance to material environmental or social challenges. Give explanations when SPTs are revised. 
   

• Report against objectives over time and explain how performance against KPIs or targets is monitored.

• Don’t use unambitious or easily achievable KPIs as sole evidence of impact. 
   

• Don't make prominent impact claims for an SLB whose SPTs are not indicative of plausible positive environmental or social impact or are not linked to broader impact on people or the environment.
   

•  Don’t present project level KPIs prominently where the financed projects are not in line with the issuer’s core sustainability related operations. 
   

• Don’t fail to deliver on post‑issuance reporting that was committed to at issuance while continuing to reference positive pre‑issuance second‑party opinions (SPOs) based on the promised impact reporting.

Type of claim

Do’s

Don’ts

Clarity of the transition ambition

• Explain the ambition and intended transition outcome (e.g. reducing portfolio emissions, real economy decarbonisation, exposure to transitioning investments). 
   

• Describe the science-based scenarios, decarbonisation pathways, or other frameworks underpinning the ambition, in alignment with the Paris Agreement and EU climate objectives. 
   

• Explain the scope of the transition ambition, including, where relevant, the asset classes or emission scopes covered. 
   

• Explain how achievement of the ambition will be assessed and measured, based on decision useful, quantitative metrics, including their meaning, scope and any material data limitations. 
   

• Where targets are disclosed, specify the metrics, time horizon, relevant base year, base value and intermediate milestones. 
   

• Explain key assumptions and challenges that may affect the achievability of the ambition.

• Don’t rely solely on broad aspirational statements, without explaining how achievement of the transition ambition will be assessed. 
   

• Don’t use metrics or alignment claims without sufficiently explaining their meaning, scope and limitations. 
   

• Don’t present portfolio decarbonisation targets in a way to suggest that portfolio decarbonisation equates to real-economy emissions reductions. 
   

• Don’t refer to external validation or independent opinions without clearly explaining their scope, what has been assessed and any material limitations.

Adequacy of the implementation strategy and action plan

• Explain how the underlying holdings, constituents or financed activities support the stated transition ambition. 
   

• Where a benchmark is replicated or used as a reference in the transition strategy,   explain its role and how it relates to the fund’s transition objective. 
   

• Clarify how any exposure to fossil fuel-related activities or other high-emitting sectors is consistent with the transition ambition. 
   

• Explain the extent to which investee companies' transition plans are underpinned by validated or science-based climate transition targets. 
   

• Describe any exclusions and positive screening criteria used to identify investments in line with the transition ambition. 
   

• For debt instruments, explain how the financed activities or projects support the issuer's ambition and achievement of transition objectives.

• Don’t present transition ambitions without explaining the key elements of the implementation strategy. 
   

• Don’t rely on ESG ratings, scores or proprietary assessments without explaining the underlying methodology and relevance to the transition ambition. 
   

• Don’t refer to stewardship or engagement without explaining how they support the transition ambition, including any escalation mechanisms.

Transparency on progress achieved

• Regularly report progress against previously communicated ambition, targets and milestones, in an easily identifiable manner. 
   

• Explain any material data limitations, estimation techniques or assumptions affecting interpretation of the reported progress. 
   

• Report on the progress of exposures in high emitting sectors, including fossil fuel-related activities. 
   

• Communicate, in a timely manner, where progress falls below expectations or targets are no longer considered achievable, including the reasons and any corrective actions.
   

• Where the ambition is to support real-economy decarbonisation, report progress using metrics relevant to that objective (e.g. attribution analysis9 or the number of portfolio companies reducing their emissions). 
   

• Ensure that hyperlinks to supporting information are active, up to date and easily accessible.

• Don’t communicate progress solely through broad narratives or scattered references across various documents. 
   

• Don’t report selectively on positive developments while omitting material delays or challenges.
   

• Don’t present progress using metrics and methodologies inconsistent with those originally communicated. 
   

• Don’t make material changes to the methodologies or indicators used to report progress without clearly explaining the reasons and their implications. 
   

• Don’t present progress on individual actions, investments or activities as overall progress towards the stated ambition.
   

•  Do not refer to external assurance or verification without explaining its scope, the information assessed and any material limitations.