🌱 Context
ESMA's Guidelines on funds' names using ESG or sustainability-related terms entered into force on 21 November 2024. All new funds launched after this date must comply immediately. Existing funds had until 21 May 2025 to comply or rename. This article covers what this means for your marketing communications.
The greenwashing problem in Luxembourg funds
Luxembourg is home to over 3,800 investment funds — more than any other EU jurisdiction. Among these, ESG-labelled funds grew by 340% between 2019 and 2024. This growth attracted intense regulatory scrutiny: ESMA, the CSSF, and the European Commission all identified greenwashing as a systemic risk to investor trust and capital markets integrity.
The core problem is the gap between ESG claims in marketing materials and the actual investment approach. A fund calling itself "Green Future Leaders" while holding 15% of its portfolio in oil companies is the obvious case. But the regulatory concern goes much deeper — into vague language, aspirational claims, and selective disclosure.
ESMA's guidelines: the three threshold tests
ESMA's guidelines create three fund categories based on the ESG-related terms used in their names, each with a minimum asset threshold:
Environmental / ESG terms
Examples: "ESG", "Environmental", "Climate", "Green", "Eco"
80% of assets must meet the ESG characteristics advertised
Must also apply Paris-aligned Benchmark exclusions
Social terms
Examples: "Social", "Equality", "Inclusive", "Diversity"
80% of assets must meet the social characteristics advertised
No exclusion requirement, but claims must be substantiated
Sustainability / Impact terms
Examples: "Sustainable", "Sustainability", "Responsible", "Impact"
80% of assets must meet sustainability criteria + meaningful portion in sustainable investments per SFDR
Highest threshold — applies Paris-aligned AND climate transition exclusions
What this means for your marketing communications
The fund name rules have direct implications for how you market your funds:
- Fund name determines marketing language. If your fund is named "XYZ Sustainable Equity Fund", every marketing communication must use language consistent with that sustainability claim — including the asset thresholds being met.
- You cannot use sustainability language more liberally than your fund name allows. A fund not classified under Article 8 or 9 of SFDR cannot use terms like "sustainable", "ESG-integrated", or "responsible" in marketing without risk of greenwashing allegations.
- Aspirational language is high-risk. "We are on a journey towards net zero" or "integrating ESG factors into our process" without specific, verifiable methodology is increasingly flagged by ESMA and national regulators as potentially misleading.
The 6 greenwashing red flags in marketing copy
Vague environmental claims
""Investing sustainably for a greener future""
No specific criteria, methodology, or measurable outcome — classic greenwashing
Cherry-picked metrics
""Our portfolio reduced its carbon footprint by 40%""
Without specifying the baseline period, scope (1/2/3), and methodology, this claim cannot be verified
Fund classification mismatch
"Article 6 fund marketed as 'ESG-conscious'"
Using ESG language for a fund that has made no binding ESG commitments is a direct violation
Outdated ESG data
""100% screened against controversial weapons""
If the portfolio has changed since the screening date, the claim may no longer be accurate
Implied superiority
""The responsible choice for your portfolio""
Implies superior ESG outcomes without substantiation
Social washing
""Committed to diversity and inclusion""
Without measurable criteria for the investee companies, this is aspirational and likely misleading
How Komplync handles ESG compliance
Komplync's compliance engine includes a dedicated ESG/SFDR module that checks:
- Whether ESG terminology in the content is consistent with the fund's SFDR classification (Article 6, 8, or 9)
- Presence of aspirational language without measurable criteria
- Consistency between sustainability claims and fund name guidelines under ESMA's framework
- Missing substantiation for specific metrics or claims
This module is updated as ESMA and CSSF publish new Q&As and guidance — so your team is always working against the current regulatory standard.
Check your ESG content for greenwashing risk
Komplync's SFDR/ESG module scans every sustainability claim against ESMA's current guidelines.
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