On 13 December 2024, ESMA published Q&As containing further details on specific aspects of the practical application of the Guidelines on funds' names using ESG or sustainability-related terms
The Q&As apply to UCITS and AIF and are covering three specific topics:
- green bonds (ESMA QA 2368 for UCITS and ESMA Q&A 2370 for AIF),
- the convergence on “meaningfully investing in sustainable investments” (ESMA QA 2373 for UCITS and ESMA QA 2374 for AIF), and
- the definition of controversial weapons (ESMA QA 2371 for UCITS and ESMA QA 2372 for AIF).
The objective is to ensure a smooth application of the Guidelines through common understanding of key concepts:
- the Q&A on green bonds specify that investment restrictions related to the exclusion of companies do not apply to investments in European Green Bonds. For other green bonds, fund managers may use a look-through approach to assess whether the activities financed are relevant for the exclusion;
- the Guidelines provided that funds using sustainable terms in their name have to commit to “invest meaningfully in sustainable investments”. The Q&As clarify that while national competent authorities should carry out a case-by-case analysis of how any sustainability-related term is used in the name of a fund, national competent authorities may find that investment funds with "sustainable" terms in their names investing less than 50% of the proportion of investments in sustainable investments are not "meaningfully investing in sustainable investments". That amount could be higher, subject to the circumstances of the case; and
- the Q&A on controversial weapons specifies that the reference for the exclusion related to controversial weapons should be the one referred to in SFDR principal adverse impact indicator 14 of Table 1 of Annex 1 of the SFDR Level 2 regulation (Commission Delegated Regulation (EU) 2022/1288).
Please refer to our previous newsletter on the guidelines on funds names for further information on this matter.
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