New Guidelines For Naming ESG Funds, A Risk For Fund Managers

ESMA published on 18 November 2022 a Consultation Paper on Guidelines on funds' names using ESG or sustainability-related terms (the "ESMA Guidelines") in order to prevent greenwashing risk. These may, potentially, have massive implications for private equity fund managers.

Greenwashing Risk & Fund Names

Investors are allocating an ever-increasing proportion of their portfolios towards ESG strategies and may reasonably expect funds with these names to invest in companies with policies, practices, or characteristics that are consistent with ESG standards. The proposed ESMA Guidelines seek to regulate funds' names to further help to prevent potential greenwashing risk in fund names. They are applicable to alternative investment fund managers and UCITS management companies and are relevant to allfund documentationandmarketing communications addressed to (potential) investors of UCITS and AIFs. The ESMA Guidelines specify criteria in terms of quantitative thresholds