ESG: ESMA publishes Q&As on Funds’ Names Guidelines

On 13 December 2024, ESMA published Q&As on aspects of the practical application of its Guidelines on funds' names using ESG or sustainability-related terms.

For more information on the ESMA Guidelines, see here.

The Q&As cover three topics:

• green bonds – the new Q&A explains that investment restrictions related to the exclusion of companies do not apply to investments in European Green Bonds. For other green bonds, fund managers can use a look-through approach to assess whether the activities financed are relevant for the exclusions.
• the convergence on “meaningfully investing in sustainable investments” – the new Q&A establishes a common understanding among NCAs that funds cannot be said to be “meaningfully investing in sustainable investments” where they contain less than 50% of sustainable investments.
• the definition of controversial weapons – Article 12 of Delegated Regulation (EU) 2020/1818, made under the Benchmarks Regulation requires administrators of EU Paris-aligned benchmarks to exclude companies “involved in any activities related to controversial weapons” from those benchmarks.

The new Q&A specifies that the reference for this exclusion should be the one referred to as PAI indicator 14, in Annex I Table 1 of the SFDR Level 2 RTS

The Q&As for UCITS in respect of

• green bonds are here
• investing in sustainable investments are here and
• the definition of controversial weapons are here

The Q&As for AIFs in respect of

• green bonds are here.
• investing in sustainable investments are here and
• the definition of controversial weapons are here

Note that, apart from the actual number of the Q&As, the documents for UCITS and AIFs are identical.