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ESMA Consultation

The Netherlands Advisory Board on impact investing (NAB) represents a community of 28 Dutch stakeholders actively involved in the impact investing ecosystem.

The NAB welcomes the opportunity to respond to the consultation on Guidelines on funds’ names using ESG or sustainability-related terms as published by ESMA on 18 November 2022.

The NAB agrees that funds and other financial products should not mislead investors by misrepresenting sustainability-related practices or features of a product. We recognize the significant impact fund names can have on investment decisions, particular by retail investors. In summary:

  • we find that the market would benefit from a clearer definition of what ESG-related terms are

  • we agree with the proposed threshold of 80% of the minimum proportion of investments for the use of any ESG-related terms. However it should exclude (reasonable) cash and derivatives, and not be applied in the investment and divestment period of the fund.

  • a distinct category for transition-related investments could be added.

  • we find that the 50% minimum proportion of sustainable investments applied to a 80% threshold (net, 40%) for the use of any sustainability-related terms is low. In addition, it is still unclear how the 50% is going to be assessed based on the definition.

  • the use of any impact-related terms in the fund’s name should be the most stringent: since an impact fund has the intention to generate a positive impact, it should also not cause any significant harm.

  • concerning the definition of ‘impact funds’, ESMA should better align it to GIIN notions and industry standards. ESMA should not just require that the fund, in addition to meeting the thresholds, invests with the intention to generate positive and measurable impact, but also that (i) there is a clear theory of change formulated in the investment strategy, (ii) investor contribution and additionality are clearly outlined, and (iii) appropriate impact measurement and management is into place.

Download the full response here.


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