ESMA publishes best practices for communicating ESG strategies in a clear, fair and non-misleading manner

On 14 January 2026, the European Securities and Markets Authority (ESMA) published a second thematic note aimed at promoting greater clarity, fairness and consistency in sustainability-related claims relating to financial market participants, particularly with regard to the ESG strategies pursued.

Its first thematic note on sustainability-related claims, published on 1 July 2025, was dedicated to the correct use of ESG qualifications, labels, ratings and certificates (ESG credentials). Both thematic notes – published in English only – follow up on ESMA's commitment, expressed in paragraph 5.1.3 of its Supervisory Strategy for the period 2023-2028, to tackle greenwashing.

As expressly clarified, these notes do not introduce new regulatory transparency requirements ("these principles do not create new disclosure requirements"). Rather, they set out ESMA's expectations regarding sustainability-related claims contained in so-called "non-regulatory" communications, including marketing materials and voluntary reports ("non-regulatory oral and written communications [...] such as marketing materials and voluntary reporting"), disseminated by entities throughout the sustainable investment value chain – in particular, issuers, fund managers, benchmark administrators and investment service providers. 

Ambiguous concepts

The cornerstone of ESMA's approach in both thematic notes is that every sustainability-related claim should be based on four key principles, as they should be accurate, accessible, substantiated and up to date. 

The second thematic note clarifies how these principles should be applied by financial market participants when reporting on how ESG factors are integrated (ESG integration) or ESG exclusion criteria are applied (ESG exclusions) in investment policies.

Currently, ESMA notes, based on certain empirical analyses, financial market participants often refer to ESG integrations and ESG exclusions when describing the ESG strategy implemented in relation to financial products. However, although there is general consensus on the meaning of these terms, they have ended up taking on a meaning that is too vague and they are used to describe a broad range of investment choices and behaviours, fuelling greenwashing.

Based on the mere statement that ESG factors are integrated into investment choices, ESMA notes that investors are therefore unable to understand whether these factors are considered binding or not; how they are weighted in relation to other financial aspects; whether they are assessed according to a double materiality approach (taking into account the possible consequences for the real economy), or a single (financial) materiality approach (only in relation to the possible impact on the value of financial products). 

Similarly, the statement that ESG exclusions are applied may reveal the application of very different ESG filters and criteria, as well as rather disparate methods of implementation (at the level of individual products; with respect to specific thresholds).

For these reasons, ESMA has intervened to provide some practical guidance for the benefit of both investors and financial market participants ("practical do's and don'ts [...] to provide useful guidance both to investors and to the market participants making these claims").

Good and bad practices

With regard to the integration of ESG factors, ESMA therefore calls on financial market participants: 

• to provide a clear definition of the terms used and accurately describe how ESG factors are considered for the purposes of investment portfolio composition, also clarifying the meaning of abstract terms through concrete examples and refraining from using generic terminology ("do not use the term 'ESG integration' as an umbrella term");
• to specify whether the consideration of ESG factors plays a binding role in investment decisions and their impact on portfolio construction process and portfolio composition;
• to clarify how ESG factors are integrated for the purposes of financial assessment of products and whether a single or double materiality approach is used;
• to maintain the focus on the integration of ESG factors at the individual product level, refraining from making statements about the degree of integration at the entity level;
• to specify at what stage of the investment process ESG factors are integrated (for example, in asset allocation or in the selection of individual products) and, where applicable, how they are given different consideration depending on the asset class;
• not to state that a particular product integrates ESG factors simply because it complies with an ESG benchmark;
• not to emphasise the sustainability profile of a product based on the integration of ESG factors, unless certain specific objective circumstances, expressly indicated, are met. 

With regard to the application of ESG exclusion criteria, ESMA calls on financial market participants to:

• describe in plain language the exclusion criteria applied and how they work, refraining from highlighting the application of ESG exclusion criteria unless they are clearly defined and applied consistently;
• clarify whether the exclusion criteria are such as to prevent investment at the individual product level, or whether exclusion thresholds are set at the portfolio level;
• specify whether a single or double materiality approach is followed;
• clarify to what extent and to what degree the exclusion criteria used lead to a restriction of the investable universe;
• clarify whether the exclusion lists used in relation to individual products are specific or generally applied at entity level.
   

The thematic note also provides concrete examples of the application of the good and bad practices indicated.

Osborne Clarke comment

The publication of this thematic note reconfirms ESMA's strong focus on tackling greenwashing and promoting greater transparency for investors. The efforts towards convergence at the supervisory level are certainly commendable and contribute positively to the creation of an effective common level playing field among financial market participants. 

The good and bad practices indicated are also of considerable importance for financial operators: failure to comply with them is not only likely to be viewed negatively by the authorities but also can damage their reputation and their relationships with customers.