ESMA Issues New Guidance on Impact and Climate Transition Claims to Curb Greenwashing

Key Takeaways

• ESMA has published two thematic notes addressing sustainability-related impact claims and climate transition claims made through funds, bonds, and benchmarks.
• While non-binding, the notes clarify regulatory expectations under the existing "clear, fair and not misleading" communication standard and provide concrete examples of good and poor market practice.
• Compliance teams should use these notes to benchmark current disclosure practices and reduce greenwashing risk ahead of the SFDR review.

Deep Dive

These thematic notes represent the latest instalment in ESMA's ongoing series on sustainability-related disclosures, following earlier notes on ESG credentials and ESG strategies. Although the notes do not introduce new binding regulatory requirements, they are significant because they articulate ESMA's supervisory expectations regarding how market participants should substantiate and communicate positive impact and climate transition claims. For compliance teams, this means the notes should be treated as de facto guidance on how existing "clear, fair and not misleading" obligations apply specifically to sustainability marketing and disclosure materials.

The core expectations outlined are twofold. First, for impact claims, firms should clearly articulate the intended difference they aim to make, the mechanism by which impact will be generated, and the methodology for measuring results. Second, for climate transition claims, firms must clearly communicate their transition ambition, the implementation pathway, and how progress will be tracked and reported—including explicit disclosure of underlying assumptions, data limitations, and dependencies on external factors. Both notes emphasize that vague, overly ambitious, or unsubstantiated claims increase greenwashing risk and regulatory scrutiny.

No specific implementation deadline is attached to these notes, as they are interpretive rather than binding; however, firms should anticipate that supervisors across EU member states will reference these notes when assessing marketing materials, fund prospectuses, and bond documentation going forward. This is particularly relevant given the ongoing SFDR review, where ESMA explicitly notes the thematic notes should not be read as prescribing specific approaches under the revised framework, but current disclosure practices will likely face heightened scrutiny in the interim.

Recommended actions include: (1) conducting a gap analysis of existing fund, bond, and benchmark marketing materials against the do's and don'ts outlined in both notes; (2) reviewing impact measurement methodologies and transition plan disclosures for clarity and completeness; (3) ensuring marketing and investor relations teams are briefed on the distinction between ambition statements and verifiable claims; and (4) monitoring further ESMA publications tied to the SFDR review for alignment. Firms that fail to adapt risk enforcement action under national greenwashing rules, reputational damage, and potential mis-selling claims from investors who relied on overstated sustainability claims.

Source: European Securities and Markets Authority