ESMA warns of greenwashing in European fund industry's ESG claims

A significant portion of the European fund industry routinely promotes ESG qualifications without providing documentation, sparking new concerns about greenwashing, according to market regulator ESMA.

This was reported by Bloomberg. Marketing communications for ESG products and services are largely generic, and social media posts about seemingly green initiatives that provide no evidence are "common," stated the European Securities and Markets Authority (ESMA). The findings were published in a review of more than 200 banks and asset managers, spanning two years.

"ESMA is concerned about the instances of non-compliance" identified by national authorities that collaborated with the regulator on its review, according to the report. Such practices give potential investors "misleading impressions that the products, services, or brand in question are ESG-oriented when they are not."

According to the ESMA report, banks and asset managers claimed that the funds they sold had positive environmental or social impacts, better returns, and lower volatility without substantiating their claims.

ESMA's findings highlight the importance of ESG product providers offering solid evidence that they are ESG-compliant. This is particularly relevant for the real estate industry, where ESG is becoming an increasingly important criterion for sustainable property value.