Introduction
On 14 January 2026, the European Securities and Markets Authority (ESMA) published a second thematic note to promote clarity in sustainability-related claims (the Thematic Note). This Thematic Note focuses on claims relating to Environmental, Social and Governance (ESG) strategies, specifically “ESG integration” and “ESG exclusions” (the ESG Strategies), which are widely used by market participants in marketing communications.
As with the first thematic note on ESG credentials[1] (the First Note), the main objective of this Thematic Note is to manage financial market participants’ expectations, including as issuers, fund managers and investment service providers (FMPs) regarding sustainability claims. This aims to prevent misleading communication and ultimately reduce greenwashing risks. These FMPs should use this Thematic Note as general guidance for non-regulatory oral or written communications (i.e. information that is not required by specific disclosure standards).
ESMA explains that when referring to an ESG strategy, key terms, such as “negative and positive screening”, “best-in-class selection”, “thematic and impact investing”, are often used, indicating a broad market understanding of overlapping ESG strategies. ESMA has noted in particular that “ESG integration” and “ESG exclusions” may have different meanings for FMPs and may cover strategies with different level of ambition. Therefore, if not explained in clearly, communications around “ESG integration” and “ESG exclusions” may be misleading and enhance greenwashing risks.
To this end, ESMA reiterates that sustainability claims should follow four principles, set out in the First Note: accuracy, accessibility, substantiation and up to date.
In the Thematic Note, ESMA provides useful and concrete information, including definitions and the key differences between the two ESG Strategies. Most importantly, the Thematic Note outlines the key differences in market practices regarding communication around each of “ESG integration” and “ESG exclusions”, on which the do’s and don’ts, set out in the Thematic Note, are based and which are illustrated through concrete examples.
Sustainability claims on ESG Strategies
| ESG integration | ESG exclusions | |
| ESMA definition | Strategy aimed at improving risk-adjusted returns by considering material ESG risks and opportunities. | Strategy to avoid/minimise exposures or align with values/norms by consistently filtering the investable universe. |
| Key difference | Does not automatically exclude investments but assesses attractiveness via ESG factors. | Focuses on prohibition of specific holdings/assets. |
| Market practices | There is consensus on the step or activity of the investment process where it applies (analysis and decision making/portfolio construction steps), but practice differs on:
| There is a consensus on the step or activity of investment process where it applies (analysis and decision making/portfolio construction steps), but practice differs on:
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| Do’s |
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| Don’ts |
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What’s next?
The Thematic Note forms part of a study conducted by ESMA addressing greenwashing risks in support of sustainable investment. It serves as an educational document for FMP and provides guidance. Therefore, when communicating on an ESG integration or ESG exclusions strategy, FMPs should provide transparent, methodologically and robust explanations of what this means in practice and its impact on the portfolios.
Our sustainability experts, Aurélien Hollard and Julie Pelcé, will continue to monitor the applicable regulatory landscape for FMPs. In the meantime, please contact us if you have any questions.
[1] For more details on the first thematic notes issued by ESMA, please click here.
