Introduction
On 12 October 2026, the European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, published two additional thematic notes on sustainability-related claims: a third note focusing on impact claims (the Impact Note) and a fourth note focusing on climate transition claims (the Transition Note and, together with the Impact Note, the Thematic Notes).
The Thematic Notes are part of ESMA’s wider series aimed at promoting greater transparency and consistency in sustainability-related disclosures and follow the previous thematic notes on ESG credentials and ESG strategies[1] (the Previous Notes). As with the Previous Notes, they offer practical do’s and don’ts for making sustainability claims in non-regulatory oral or written communications (i.e. information that is not required by specific disclosure standards, such as marketing material and voluntary reporting), illustrated through concrete examples of good and poor practices based on observed market practices. The Thematic Notes are addressed to market participants, including issuers, investment managers, benchmark administrators and investment service providers (FMPs), and aim to ensure that communications are clear, fair and not misleading, hence reducing the risk of greenwashing.
As regards impact claims, ESMA notes that market participants understand positive environmental or social impact differently and attach different levels of ambition to their impact claims. Observed practices include confusion between investor and investee impact, and claims made without a clear rationale as to how the investment strategy is expected to contribute to achieving positive impact. FMPs are therefore encouraged to explain clearly what difference they expect to make, how they aim to generate positive impact and how they will measure results, so that investors receive clear and balanced information.
As regards climate transition claims, the Transition Note draws on observed market practices across funds, bonds and benchmarks. Unlike claims based on current environmental characteristics, such claims are often forward-looking and subject to uncertainty, as their achievement may depend on future actions, assumptions and external factors (e.g. technological progress, public policy developments or future market conditions). ESMA highlights the importance of clearly communicating (i) what the transition ambition is, (ii) how it is expected to be implemented and (iii) how progress will be assessed and communicated, including relevant assumptions, data limitations and dependencies.
In both Thematic Notes, ESMA reiterates that sustainability claims should follow four principles: accuracy, accessibility, substantiation and up to date. The key observed market practices, as well as the main do’s and don’ts set out in the Thematic Notes, are summarised below.
Sustainability claims on impact and climate transition
Scope
- Impact claims: claims that explicitly or implicitly mention “impact”, “positive change” or equivalent terms, made through funds, use of proceeds (UoP) bonds and sustainability-linked bonds (SLBs).
- Climate transition claims: forward-looking claims relating to the gradual improvement of the climate performance of companies, assets or activities towards a climate-neutral economy, made through funds, bonds and benchmarks.
Key concepts – impact claims
- Intentionality (explicit aim to generate positive impact, supported by a theory of change),
- Additionality (generating positive impact that might not otherwise happen, which may relate to investee impact and/or investor impact, two distinct concepts that should not be conflated)
- Measurability (tracking progress towards objectives through KPIs focusing on outputs, outcomes or impact).
Key concepts – climate transition claims
- Transition ambition (objectives, targets and metrics, base year and base value, and contribution to EU or global climate objectives),
- Implementation strategy
- Action plan, and progress achieved towards the ambition.
Market practices
Impact claims
Practices diverge and market participants often do not explain their approach well, in particular:
- impact objectives may be too broad (e.g. promoting UN SDGs), absent or non-binding, with a vague or missing theory of change,
- ESG criteria, or the selection of investments that avoid harm, may be used instead of impact criteria,
- for funds, the distinction between investee and investor impact is often unclear, and standard ESG engagement may be presented as impact-generating,
- for bonds, financed activities or targets may be immaterial to the issuer’s core operations, and post-issuance reporting may not be aligned with pre-issuance commitments.
Climate transition claims
Practices are evolving and transition claims are substantiated in different ways depending on the product:
- funds define their ambition by reference to portfolio emissions reductions, portfolio construction criteria or contribution to real-economy decarbonisation, using combinations of exclusions, positive screening and engagement,
- benchmarks reflect transition claims in their methodology, while for bonds the link between the financing instrument and the stated transition ambition is not always clearly articulated,
- systematic reporting on progress achieved against previously stated transition ambitions remains limited.
Do's
Impact claims
- Clarify the environmental or social problem(s) targeted and how the intended impact will be attained and measured,
- Be clear and consistent about the ambition with reference to intentionality, additionality and measurability,
- For funds, clarify whether the fund aims to generate investee impact, investor impact or both and, where the claim is limited to investee impact, make clear that investing in the fund does not bring additional impact,
- Select relevant impact KPIs (considering ex-ante targets), explain whether they measure outputs, outcomes or impact, and make available assumptions and methodological limitations,
- For bonds, ensure consistency with the issuer's sustainability strategy, be transparent about the materiality of the projects or targets, and report against objectives over time.
Climate transition claims
- Explain the ambition, the intended transition outcome and its scope, as well as the science-based scenarios or pathways underpinning it;
- Where targets are disclosed, specify the metrics, time horizon, base year, base value and intermediate milestones, and explain key assumptions and challenges;
- Explain how underlying holdings, benchmark constituents or financed activities support the ambition, including how any exposure to fossil fuel-related activities or high-emitting sectors is consistent with it;
- Regularly report progress against previously communicated ambition, targets and milestones, explaining material data limitations and assumptions;
- Communicate in a timely manner where progress falls below expectations or targets are no longer considered achievable, including the reasons and any corrective actions.
Don'ts
Impact claims
- Don't make claims about generating positive impact without a theory of change clearly explaining how impact will be achieved,
- Don’t rely on exclusion-based screening or ESG risk-focused metrics as substitutes for impact-related criteria, or label products as “impact” solely due to asset class or sector,
- Don’t imply that ownership of listed securities alone generates impact, or reference impact-motivated engagement without clarifying how it differs from standard ESG engagement,
- Don’t report selectively or omit binding impact objectives and KPIs selected ex-ante.
Climate transition claims
- Don’t rely solely on broad aspirational statements, or suggest that portfolio decarbonisation equates to real-economy emissions reductions,
- Don’t rely on ESG ratings, scores or proprietary assessments without explaining their methodology and relevance to the transition ambition, or refer to stewardship or engagement without explaining how they support the transition ambition, including any escalation mechanisms,
- Don’t report selectively on positive developments, or change the metrics and methodologies used to report progress without explaining the reasons and implications.
What’s next?
The Thematic Notes do not create new regulatory requirements and should not be understood as prescribing a particular approach or level of ambition, for example in the context of the ongoing review of the Sustainable Finance Disclosure Regulation (SFDR). Instead, they provide observations and examples intended to support FMPs’ understanding of the existing expectations under the principle of clear, fair and not misleading communication. FMPs making impact or climate transition claims should therefore review their non-regulatory communications in light of the do’s and don’ts set out in the Thematic Notes.
CMS Luxembourg's sustainability experts, Aurélien Hollard, Julie Pelcé and Karina Constantin, will continue to monitor the applicable regulatory landscape for investment fund managers and investors. In the meantime, please contact CMS Luxembourg if you have any questions.
[1] For more details on the previous thematic notes issued by ESMA on ESG credentials and ESG strategies, please click here and here.
Authors:
- Aurélien Hollard, Partner at CMS Luxembourg
- Julie Pelcé, Senior Associate at CMS Luxembourg
- Karina Constantin, Managing Associate at CMS Luxembourg
- Margherita Armand-Hugon, Legal Knowledge Assistant at CMS Luxembourg
