Beyond Sustainability Promises: ESMA Clarifies Impact and Climate Transition Claims

An investment fund may hold shares in a renewable energy company without necessarily contributing to the environmental benefits that company generates. Similarly, a fund may report a lower portfolio carbon footprint even when emissions from its investee companies have not fallen. These distinctions matter when sustainability-related claims are communicated to investors.

On 27 October 2026, the Malta Financial Services Authority (“MFSA”) issued a circular drawing attention to two thematic notes published by the European Securities and Markets Authority (“ESMA”) on 12 October 2026. The notes address impact claims and climate transition claims made in non-regulatory communications, including marketing materials and voluntary reporting.

Importantly, the notes do not introduce new regulatory requirements. Instead, they provide practical examples of how existing expectations concerning clear, fair and non-misleading information apply to sustainability-related claims.

Investing in Impact is Not the Same as Creating it

One concern identified by ESMA is the tendency to attribute an investee company’s positive environmental or social outcomes to the investor without adequately explaining the investor’s contribution. A fund investing in clean technology, for example, should not automatically present the resulting environmental benefits as impact generated by the fund itself.

ESMA identifies three important considerations when communicating impact claims: intentionality, referring to the positive impact being pursued; additionality, concerning whether positive outcomes arise that might not otherwise have occurred; and measurability, concerning how the impact delivered is assessed.

Additionality may relate to the impact generated by an investee company or to the contribution made through an investor’s actions. These are distinct concepts and should not be confused. Providing new financing or engaging with investee companies may contribute to positive outcomes, but the relationship between those actions and the claimed impact should be clearly explained and supported.

Climate Commitments Need a Credible Pathway

Climate transition claims present a different challenge. References to net-zero ambitions or decarbonisation targets generally concern future outcomes that may depend on technological developments, market conditions and other factors beyond a firm’s control.

ESMA therefore emphasises the importance of explaining the transition ambition, how it will be achieved and how progress will be assessed. Depending on the nature of the claim, relevant information may include targets, baseline years, intermediate milestones, underlying assumptions and data limitations.

The distinction between portfolio decarbonisation and reductions in real-economy emissions is particularly significant. Changing a fund’s holdings may reduce its reported portfolio emissions without necessarily reducing emissions from the underlying businesses. Investors should therefore not be given the impression that a reduction in portfolio emissions automatically translates into an equivalent environmental benefit.

Implications for Investment Funds and Their Managers

For investment funds and their managers operating in Malta, ESMA’s thematic notes provide a useful reference when reviewing sustainability-related claims made on websites, in factsheets and in other investor-facing materials.

ESMA identifies four principles for such communications: claims should be accurate, accessible, substantiated and up to date. In practice, this means ensuring that sustainability statements reflect the product’s actual strategy, are supported by credible information and are reviewed when circumstances change.

These considerations should also be viewed in the context of existing EU requirements. Article 4(1) of Regulation (EU) 2019/1156 requires Alternative Investment Fund Managers (“AIFMs”) and UCITS management companies, among others, to ensure that information contained in marketing communications addressed to investors is fair, clear and not misleading. Separately, Article 13(1) of the Sustainable Finance Disclosure Regulation requires financial market participants and financial advisers to ensure that their marketing communications do not contradict information disclosed under that Regulation.

ESMA’s latest publications also complement its 2025 sustainability reporting priorities, which emphasised transparency and clarity in corporate sustainability disclosures. Although the publications address different regulatory frameworks, both reflect the importance of ensuring that sustainability information is meaningful and supported by appropriate evidence.

For financial market participants, the challenge is not simply to communicate sustainability ambitions, but to ensure that those ambitions are accurately represented. The distinction between what is claimed and what can be substantiated remains central to credible sustainability communications.