ESMA specifies expectations for the supervision of sustainability information and risks for funds

The European Securities and Markets Authority (the "ESMA"), in order to ensure convergence in the supervision of investment funds with sustainability features and in the fight against greenwashing by investment funds, published a "Supervisory Briefing“ on 31 May 2022.

With the Supervisory Briefing, ESMA aims to ensure that national supervisory authorities systematically check the content of ESG-related information in pre-contractual documents (e.g. prospectus) and annual reports using checklists and check whether essential elements of the information are present on the website.

The following statements by ESMA are particularly noteworthy:

• The Supervisory Briefing contains principled guidance on the use of fund names:
  The terms "ESG", "green", "sustainable", "social", "ethical", "impact" or other ESG-related terms should only appear in the fund name if they are materially supported by sustainability features, themes or objectives of the fund.
• Any other available information (complaints, whistleblower reports, media reports) reported by custodians, among others, should be taken into account on the basis of a risk-based approach and should be able to be used by national supervisors in their ongoing supervision.
• The use of references and links in the pre-contractual ESG information should be limited to the sections "Has an index been identified as a benchmark?" and "Where can I find more product-specific information on the internet?".
• The Supervisory Briefing also provides some guidance on how national authorities should supervise the integration of sustainability risks into the organisation of undertakings for collective investment in transferable securities (the "UCITS") and AIF managers.

It is currently not possible to foresee what effects the ESMA Supervisory Briefing will have on BaFin's supervisory practice.