Addressing greenwashing risks in support of sustainable investments

Second Note: ESG strategies

14 January 2026 (ESMA36-429234738-165 )

I. General expectations

These thematic notes are prepared for the attention of market participants with an educational objective and build on observed market practices. Using the four principles as a basis, the second note focuses on ESG strategies. Other thematic notes will follow, as judged necessary. When combined, the notes should be read as a thematic study.

Why do sustainability claims matter?

  1. Sustainability information remains increasingly important to the choices of investors. Market participants have a responsibility to communicate sustainability information in line with the principle of “fair, clear, and not-misleading information”. Sustainability claims are related to key aspects of the sustainability profile of an entity or a product[1].
  2. Sustainability claims are made by market participants across the Sustainable Investment Value Chain (SIVC), notably by issuers, fund managers, benchmark administrators and investment service providers. Due to the complex nature of sustainability information, market participants making sustainability claims may risk that these claims are misinterpreted and that investors are misled, regardless of whether or not this is the market participant’s intention.
  3. In line with the work carried out by ESMA on greenwashing in which good and bad practices have been observed, this section aims to explain and clarify ESMA’s expectations towards market participants when making sustainability claims, leveraging off the European Supervisory Authorities (ESAs)’ common high-level understanding and the core characteristics[2] of greenwashing as stated in the ESMA Progress Report[3].
  4. Market participants should acquaint themselves with the below four principles for making sustainability claims to ensure that all claims are clear, fair, and not misleading and thereby avoid the risk of greenwashing. Misleading claims can in particular take the form of cherry-picking, exaggeration, omission, vagueness, inconsistency, lack of meaningful comparisons or thresholds, misleading imagery or sounds, etc.

Four principles to follow

  1. ESMA’s starting point in designing these principles is the ESA’s Progress Reports on Greenwashing that recognised misleading sustainability claims being a concern from an investor protection perspective, whether they are specifically covered by the EU sustainable finance rulebook or not. Certain EU legal texts go further in defining the meaning of ‘clear, fair and not misleading information’[4]. The four principles are in line with those set out by the 2024 EIOPA Opinion and by the EBA Final report on greenwashing[5].
  2. The principles do not create new disclosure requirements but aim to remind market participants about their responsibility to make claims only to the extent that they are clear, fair and not misleading. These principles and the following guidance included in these notes apply to non-regulatory oral and written communications, referred to as ‘communications’. For the purpose of these thematic notes, regulatory information is understood as that required by specific disclosure standards (e.g. fund or bond prospectuses, management reports, funds’ KIDs, benchmark statements), while non-regulatory information covers all other types of communications such as marketing materials and voluntary reporting. Communications aimed at retail investors may vary in length and may need to rely on the use of layering which is further explained below[6].

 

FIGURE 1: FOUR PRINCIPLES TO FOLLOW

1) Accurate

2) Accessible

• Sustainability claims should fairly and accurately represent the entity’s sustainability profile, and/or that of its financial products. This should be done without exaggeration and consistently across all communications while avoiding falsehoods.

• Claims should be precise and be based on all relevant positive and negative aspects. Omission and cherry-picking should be avoided. Claims should steer clear of vagueness and excessive references to irrelevant or non-binding information.

• Market participants should make sure that the ESG terminology and non-textual imagery or sounds used are consistent with the sustainability profile of the entity or product and do not overshadow the other contents.

• Sustainability claims should be based on information that is easy to access and easy to browse through by readers7 and at an appropriate level of detail so they are understandable. Moreover, claims should not be oversimplistic but should be easy to understand.

• Sometimes more explanation is desirable beyond the space provided, or when the aim is not to overwhelm the reader with information. This is particularly important in the case of short marketing materials aimed at retail investors. Further substantiation can then be presented to the reader in layers in the case of documents distributed in electronic format, ensuring substantiation is easy to find.

3) Substantiated

4) Up to date

• Sustainability claims should be substantiated with clear and credible reasoning, facts and processes.

• Substantiation should be based on methodologies (including comparisons, thresholds or underlying assumptions) that are fair, proportionate and meaningful. Limitations of information, data and metrics used in a claim should be made available. Comparisons should make clear what is being compared, how the comparison is made and, if possible, compare “like with like".

• Sustainability claims should be based on information that is up to date with any material change to be disclosed in a timely manner.

• The clear indication of the analysis’ date and perimeter could be useful for this purpose.

 

 

 

[1] The terms “products” is meant to cover financial products and services.

[2] (1) has a misleading component, (2) can occur at product/service level or at entity level, (3) can occur and spread intentionally or unintentionally, (4) can occur at different stages of the product lifecycle, (5) can occur in or out of the current regulatory framework, (6) the source can be the entity in question or a third party, (7) undermines trust in undertakings/markets and (8) may or may not result in immediate damage to consumers or investors.

[3] ESMA30-1668416927-2498 Progress Report on Greenwashing

[4] For further details, see Annex 2 of the ESMA36-287652198-2699 Final Report on Greenwashing.

[5] EIOPA-BoS-24-160- Opinion on sustainability claims and greenwashing & Report on greenwashing monitoring and supervision.pdf The principles match the other ESA’s principles with which they share a common trait: while each principle targets different aspects, the principles can overlap due to their complementary nature.

[6] More information on the importance of layering is present in the ESMA Opinion on the sustainable finance framework.