The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator, has published a new thematic note clarifying expectations for investment firms to mitigate greenwashing risks in the marketing and communication of ESG investment strategies.

As the importance of ESG in financial markets is rising, the guidance focuses on sustainable investment strategies that reference ESG integration and ESG exclusion approaches. ESMA observed that inconsistent and ambiguous usage of these terms in promotional materials may mislead investors because the underlying application and impact of ESG considerations vary significantly across funds.

The note outlines four core principles that sustainability-related claims should be Accurate, Accessible, Substantiated, and Up to Date. It also highlights observed market practice differences, such as whether ESG integration is mandatory or optional across portfolios, and how exclusion thresholds are defined or applied.

To address these risks, ESMA provides detailed “Do’s” and “Don’ts” along with examples of good and poor practice. For instance, firms are urged to clearly describe how ESG factors influence portfolio construction, specify whether ESG criteria are binding, and explain if exclusions are based on absolute terms or materiality considerations.

ESMA’s initiative forms part of a broader effort to enhance transparency and consistency in sustainability disclosures, mitigate misleading claims, and strengthen investor confidence in ESG-labelled products