ESMA finds increase in use of ESG-related language in the EU fund industry

Summary:

The European Securities and Markets Authority (ESMA) published an article exploring the use of environmental, social, and governance (ESG) factors in EU investment fund names and documentation. The study found that the share of EU UCITS investment funds with ESG words in their name increased from less than 3% in 2013 to 14% in 2023. Fund managers tend to use generic language rather than specific words, making it difficult for investors to verify the fund's portfolio alignment with the name. ESMA also analyzed over 100,000 fund documents using natural language processing techniques and found differences in ESG language usage between document types (regulatory and marketing materials). The study contributes to ESMA's monitoring efforts on greenwashing risks and supports regulatory efforts on ESG disclosure requirements.