Sustainability Assembled
Legal and Regulatory Market Updates Q1 2024
ESG Funds
ESMA Update: ESG Fund Names
Following its consultation in November 2023, in December 2023, ESMA published a statement providing an update on its plans relating to fund names using ESG or sustainability related terms. Having considered the feedback on the consultation ESMA has agreed amendments to the “Guidelines on funds’ names using ESG or sustainability terms”.
The Guidelines are expected to be approved and published in Q2 2024, subject to the timing of the publication of the AIFMD and UCITS Directive revised texts.
Impact Investing: Do SDG Funds fulfil their promise?
On 1 February 2024, ESMA published its report titled "Impact Investing - Do SDG Funds fulfil their promise" setting out a summary and approach that market participants can use when considering “SDG funds” and “impact investing”.
Joining the Dots
Impact investing has long been seen as essential to achieving the EU’s sustainability objectives.
There is no one universally accepted definition of “impact investing”. However, it is commonly accepted that a positive and measurable contribution to the environment and/or society is required alongside financial return.
The UN SDGs are one of the most commonly used frameworks in the context of impact investment and finance. Detailed indicators are set for each of the 17 SDGs and the United Nations Global Compact and OECD, for example, continue to build out this framework.
However, disclosure, reporting and analysis of SDG alignment remains challenging and impact claims often loosely refer to international goals such as the Paris Agreement and the UN SDGs without including details relating to the implementation of a relevant strategy and/or analysis and consideration of a methodology to ensure alignment with specific SDGs.
The increased focus on sustainability-related terms has extended to the use of and reference to terms such as “impact” and “SDGs” and “SDG alignment”.