ESMA Calls for Greater Clarity in Sustainability Impact and Climate Transition Claims

Key Takeaways

• ESMA Issues New Sustainability Guidance: The European Securities and Markets Authority has published two thematic notes addressing positive impact and climate transition claims made by financial market participants.
• Greater Clarity on Impact Claims: Firms are encouraged to explain the environmental or social difference they expect to make through funds and bonds, how they intend to achieve it, and how results will be measured.
• Climate Transition Claims Face Scrutiny: ESMA emphasizes the importance of explaining transition ambitions, implementation plans, progress assessments, and the assumptions and uncertainties underlying forward-looking claims.
• Focus on Preventing Greenwashing: The guidance provides examples of good and poor practices to help firms ensure sustainability-related communications are clear, fair, and not misleading.
• No New Regulatory Requirements: The thematic notes clarify existing expectations without imposing new obligations or prescribing particular sustainability ambitions, including under the ongoing SFDR review.

Deep Dive

The European Securities and Markets Authority (ESMA) has called on financial firms to be more precise about claims of positive environmental and social impact and climate transition, warning through new guidance that investors need clearer information about what such claims mean and how the promised results will be assessed.

In two thematic notes published October 12, the EU financial markets regulator examines sustainability-related claims made through investment funds, bonds and benchmarks. The publications draw on observed market practices and offer examples of how firms can communicate their sustainability objectives without misleading investors.

The first note addresses positive impact claims associated with funds and bonds, an area where ESMA has identified considerable differences in how market participants understand the concept of impact and the ambition they attach to it.

A fund claiming to make a positive environmental contribution, for example, may be pursuing objectives quite different from those of another product making a similar claim. Investors need enough information to understand what each intends to accomplish and how its contribution will be measured.

ESMA encourages firms to explain the difference they expect to make, how they intend to generate that impact and what methods they will use to assess the results. The authority does not prescribe a particular definition of positive impact or require firms to pursue a uniform level of ambition.

The emphasis instead falls on the information accompanying the claim. Investors should be able to understand the intended contribution and the basis on which its success will be judged, rather than having to rely on broad descriptions of a product's environmental or social purpose.

The Difficulty of Promising Future Progress

The second thematic note examines climate transition claims across funds, bonds and benchmarks, where the uncertainty surrounding future outcomes presents a particular challenge.

Such claims often depend on actions that have yet to be taken, assumptions that may prove inaccurate and external developments over which the market participant has little control. A stated transition ambition can therefore tell investors relatively little about the likelihood of its achievement unless the firm also explains the plans and conditions on which it depends.

ESMA encourages market participants to describe their transition ambitions, explain how they expect to implement them and establish how progress will be assessed and communicated.

The authority also calls attention to the assumptions, data limitations and dependencies underlying these claims. Investors should be given a clear account of the uncertainties that could affect the achievement of a stated objective, particularly when the claim concerns developments extending into the future.

ESMA does not seek to eliminate that uncertainty or require firms to guarantee particular outcomes. Its guidance concerns the quality of the information provided about the intended transition and the circumstances that may influence its progress.

Existing Rules, Clearer Expectations

The publications are the latest in a series of ESMA thematic notes addressing sustainability-related communications. Previous installments examined ESG credentials in July 2025 and ESG strategies in January 2026.

The notes focus on claims made in non-regulatory communications and provide practical examples of good and poor practices based on market observations. Their purpose is to help firms meet existing expectations that such communications be clear, fair and not misleading, while reducing the risk of greenwashing.

ESMA has expressly stated that the guidance introduces no new regulatory requirements. Nor should it be interpreted as prescribing particular investment approaches or levels of sustainability ambition, including in the context of the ongoing review of the Sustainable Finance Disclosure Regulation (SFDR).

For firms reviewing their sustainability communications, the publications provide additional examples of how existing standards apply to claims that may be difficult for investors to assess. Impact claims require a clear account of the contribution being sought and how results will be measured. Transition claims require an explanation of the intended ambition, its implementation and the uncertainties surrounding its achievement.

The guidance leaves firms to determine their own sustainability objectives. What ESMA expects is that the claims made about those objectives give investors a fair account of what is intended, what remains uncertain and how progress can be evaluated.

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