Sustainability? What is in a Name? Recent Trends in the Dynamics of the European Fund Industry

The article examines how ESMA’s new fund naming guidelines aimed to reduce greenwashing in the European sustainable investment market but achieved largely counterproductive results. ESMA’s rules require funds using sustainability-related terms to meet an 80% investment threshold and specific exclusion criteria. However, rather than improving portfolio quality, 58% of affected funds simply dropped ESG-related terms from their names, whereas 7% decided to include them. This created a more fragmented market with creative new naming conventions like ‘Screened’, ‘Committed’, and ‘Enhanced’.​ This article argues that regulating marketing rather than product quality fundamentally misses the mark. Voluntary labels that assess actual portfolio content and impact will provide better quality control than regulatory name restrictions that primarily encourage rebranding rather than meaningful portfolio improvements.