Regulatory body, ESMA, provides guidance to issuers and fund managers on combating greenwashing practices.
The European Securities and Markets Authority (ESMA) has published a new thematic note aimed at guiding market participants on sustainability-related claims, particularly in retail investor communications. This move is part of a series of actions by the European Supervisory Authorities (ESAs) following a request in 2022 by the European Commission.
The thematic note outlines four key principles for market participants making sustainability claims: Accurate, Accessible, Substantiated, and Up to Date.
1. **Accuracy**: Claims should fairly and accurately represent the sustainability profile of the entity or financial product. They must be precise, consider all relevant positive and negative aspects, and avoid omissions, cherry-picking, vagueness, or irrelevant information. Additionally, ESG terminology and non-textual elements like imagery or sounds must align with the actual sustainability profile.
2. **Accessibility**: Sustainability information should be easy to find and presented at an understandable level of detail. Claims must not be overly simplistic or obscure, ensuring investors can readily access the necessary data to assess the claim.
3. **Substantiation**: Claims should be backed by credible evidence and documentation, enabling verification and avoiding misleading representations. This supports transparency and trustworthiness in marketing and communications.
4. **Timeliness**: The information supporting sustainability claims must be current and reflect the latest data and circumstances, avoiding outdated or obsolete references.
The principles are designed as a guidance tool complementing existing regulatory frameworks and target a broad range of market participants, including banks, asset managers, issuers, and fund managers.
ESMA warns that ESG credential claims can be misleading, such as overstating the significance of having a given label or receiving an ESG award. To meet the "accessible" principle, claims should be based on sustainability information that is easy to access and at an understandable level of detail, and not overly simplistic.
The note provides examples of good and poor practices, including comparisons in claims that should be clear on what is being compared and how the comparison is made. Participation in an industry initiative requires delivering on any targets, and market participants should not continue to reference the initiative once the company has left or cherry-pick information about what it means to be a signatory.
The ESAs published their initial reports in response to the Commission's request in 2023, and their final reports in 2024, outlining supervisory responses to greenwashing risks and the need for enhanced supervision going forward. The European Securities and Markets Authority (ESMA) encourages regulators to be given increased tools and responsibilities to address greenwashing.
By adhering to **accuracy, accessibility, substantiation, and timeliness**, market participants can better ensure their sustainability-related communications are clear, fair, and not misleading while minimizing greenwashing risks as urged by ESMA.
[1] ESMA, "ESMA publishes thematic note on ESG disclosures in retail investor-focused communications", 1 July 2025, https://www.esma.europa.eu/press-news/esma-news/esma-publishes-thematic-note-esg-disclosures-retail-investor-focused-communications
[2] ESMA, "Guidelines on ESG disclosures in retail investor-focused communications", 1 July 2025, https://www.esma.europa.eu/regulation/guidelines-esg-disclosures-retail-investor-focused-communications
[3] ESMA, "ESMA consults on guidelines on ESG disclosures in retail investor-focused communications", 1 March 2023, https://www.esma.europa.eu/press-news/esma-news/esma-consults-guidelines-esg-disclosures-retail-investor-focused-communications
[4] European Commission, "Commission requests ESAs to address greenwashing risks in the EU financial sector", 26 October 2022, https://ec.europa.eu/info/publications/commission-requests-esas-address-greenwashing-risks-eu-financial-sector_en
- In the context of business and finance, the principles of accuracy, accessibility, substantiation, and timeliness, as outlined by the European Securities and Markets Authority (ESMA), require market participants to make sustainability claims that are transparent, clear, and not misleading, effectively reducing the risk of greenwashing.
- Integrating technology can significantly aid market participants in complying with the principles set forth by ESMA, as it allows for the automation of data collection, analysis, and presentation, ensuring sustainability information is up-to-date, accessible, and substantiated.
