New Q&As on application of Guidelines on funds’ names
Published 16 January 2025
Category: Impact and ESG
ESMA has published Q&As for Guidelines on funds’ names using ESG or sustainability-related terms (the “Guidelines”). The purpose is to ensure that the Guidelines are interpreted and applied in the same manner across Europe.
The question is whether applying the exclusions referred to in the Guidelines paragraphs 16-18 – according to which investments in specific companies are excluded when specific terms are used in the name of a fund – affects whether a fund manager can consider the underlying project for use of proceeds instruments or should consider the whole issuer.
It has been clarified that when it comes to investments in European Green Bonds issued under the Regulation (EU) 2023/2631 (European Green Bonds Regulation), the investment restrictions in relation to exclusion of companies in accordance with paragraphs 16-18 of the Guidelines do not apply. When it comes to investments in other green bond instruments, the exclusions should apply on a look-through basis to determine that the instrument does not finance any of the activities listed in the exclusions.
The question concerned whether investing “meaningfully” in sustainable investments – which is one of the requirements when using sustainability-related terms in the name of a fund – require fulfilment of a minimum level.
It has been clarified that despite being a case-by-case analysis for the national competent authorities, the general understanding must be that investing “meaningfully” require a proportion of sustainable investments of 50 % or more.
The question concerned the interpretation of controversial weapons referred to in the exclusions in paragraphs 16-18 of the Guidelines. The clarification specified that the list of controversial weapons provided as indicator 14 in Annex I of the SFDR should be used.
Next step
As further specified in our previous Pulse update on the guidelines on funds’ names, the Guidelines apply from 21 November 2024 for funds established after this date, whereas for funds established before 21 November 2024, the Guidelines will apply from 21 May 2025.
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