ESMA issues greenwashing guidance on impact and transition claims

ESMA announced a thematic note on 14 October covering how fund and bond providers should address greenwashing risk in positive impact and climate transition claims. The note is meant to support market participants' understanding of expectations for communication that is clear, fair and not misleading, ESG Today reported.

It is the latest in a series ESMA began in July 2025 with guidance on references to ESG credentials such as qualifications, labels, ratings and certificates, followed in early 2026 by a note on ESG integration and ESG exclusion funds. Each note in the series applies four principles: claims must be Accurate, Accessible, Substantiated and Up to Date.

On positive impact claims, ESMA said observed practices showed confusion between investor and investee impact and claims lacking sufficient substantiation. The note also cites claims made without a clear rationale for how the investment strategy is expected to contribute to positive impact, and it observes that market participants understand positive environmental or social impact differently and attach different levels of ambition to their impact claims.

ESMA encouraged providers to explain clearly what difference they expect to make and how they aim to generate positive impact. It pointed to intentionality, meaning an explicit aim to generate positive impact, and to additionality. Failure to distinguish clearly between investee impact and investor impact may result in misleading claims, the note says. Providers are also encouraged to explain how they will measure results through KPIs focused on outputs, outcomes or impact.

For climate transition claims, ESMA noted they are typically forward-looking, describing the gradual improvement of the climate performance of companies, assets or activities rather than current environmental characteristics. That creates inherent uncertainty and potential requirements for future adjustments, the regulator said, because the claims rely on assumptions and on external factors that evolve over time, such as technological progress and public policy developments. ESMA highlighted the need for clear communication on the transition ambit.

The note carries no new filing requirement and no compliance date. Its practical weight sits against the supervisory machinery around it: as this publication has reported, ESMA does not begin supervising ESG rating providers until 2027, and the EU's green-claims penalty regime took effect before a verification infrastructure existed.

The four-part test is now applied explicitly to impact and transition claims, two categories the regulator says it observed being made without adequate rationale or substantiation.