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Nearly Half of Sustainability-Labelled Funds May Have to Change Names to Meet New EU Anti-Greenwashing Rules: Clarity AI

According to a new analysis by sustainability technology platform Clarity AI, more than 40% of investment funds in the EU using ESG or sustainability-related labels may be required to change names or sell assets in order to meet new anti-greenwashing rules from the European Securities and Markets Authority (ESMA). ESMA launched these new rules after observing a sharp increase in the use of sustainability-related terms in fund names in Europe, leading to greater risk of greenwashing. Under the new guidelines, funds using ESG, sustainability, or environmental terms will need to have at least 80% of assets in investments aligned with sustainability characteristics and follow strict exclusion criteria, such as limits on investments in fossil fuels, controversial weapons, and high-emission electricity generation. The Clarity AI study examined 3,256 EU-domiciled funds using environmental or impact terms in their names. It found that 44% of these funds contained investments breaching the new exclusion criteria, with the fossil fuels criteria being the most common issue. Across different SFDR classifications, the study found that approximately half of Article 8 funds and over a third of Article 6 and 9 funds did not meet the new PAB exclusion requirements. Clarity AI noted that their analysis only covered the top 25 most frequently used terms, suggesting the non-compliance rate could be even higher. Resources: https://www.esgtoday.com/nearly-half-of-sustainability-labelled-funds-may-have-to-change-names-to-meet-new-eu-anti-greenwashing-rules-clarity-ai/

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